HOW TO REHABILITATE A SICK PROJECT

THROUGH PROPER MANAGEMENT

By: Engr. Eustaquio T. Coronel, Jr.

I am here as one of the assigned resource speaker of the PICE – Project

Management Specialty Division for this morning’s seminar. This is in keeping

with PICE’s organizational commitment to the professionalization of civil

engineering practice in our country and to the upgrading of civil

engineer’s technical knowledge and skills to world-class standards. PICE

has taken a pro-active role in leveling the playing field for the benefit of

our local professionals whose foreign counterparts have the competitive

edge in the open market.

For the brief introduction of myself, I am a licensed civil engineer who is

through and through an Operations Man, one who started from the lowest

level of construction and engineering work and went through the nitty-

gritty of said work until I finally became a Project Manager. Thus, today I

can legitimately lay claim to my 60 years of hands-on knowledge and

experience as a building contractor and as a project manager of all types

and sizes of projects.

Professionally and operationally, I met some very challenging experiences

when I managed the construction of real estate projects for Ayala Land,

Inc., Interhouse Corporation, Gotesco Realty, Inc., Isetann, Inc., Robinsons

Land Corporation, La Perla Industries, Inc., KKP Resources and

Development Corporation and Adamson & Adamson, Inc. However, the

most challenging projects I encountered were the ones in very critical

condition when entrusted to me. And I successfully turned them around to

the surprise of the deeply grateful owners or contractors.

One example of this serious problem in project management concerns a

company which owns 100 ongoing projects spread all over the country.

Apparently, its top executives were dissatisfied with the overall progress of

their building program. So, they hired me as consultant and tasked me to

assess the construction performance of their contractors including their

own in-house construction group which was the implementor of their

nationwide building program.

After evaluating all the pertinent information and data based on available

documents, my men finally came up with a Technical Audit Report. Its

almost revealing finding is the fact that 70 out of the 100 ongoing projects

were plagued by problems, the cause of which was pinpointed on the use

of the wrong system of the project management or the lack of familiarity

with the right project management.

This reference to the right project management is the focus of this

afternoon’s seminar topic: The Rehabilitation of a Sick Project. For the

purpose of this seminar, I shall define or clarify the word “rehabilitation” and

the term “sick project” within the context of my actual experience with

actual cases of projects in bad shape but which I was able to put in good

shape.

It is to be noted that when complete work stoppage happens in a project

and it remains in such condition for many months or years, the completed

items of work will gradually show signs of deterioration or even damage

due to their exposure to the elements or to the wear tear of time. The

extent and gravity of the deterioration and damage will depend upon

whether or not the proper protective and preventive measures have been

applied during the duration of the work stoppage.

In this regard, the word “rehabilitation” is used to mean the improvement

made in the existing condition of a project or its restoration to a good

condition so that it can be re-used or used for a new purpose. Regarding

the term “sick project”, it can be likened to a person who is afflicted with a

disease. If a sick person is cured of his disease by medication, a sick project

is brought back to good health by rehabilitation.

As far as sick projects are concerned, they are found mostly in urban

centers but their greatest concentration is in Metro Manila. In my long and

rich experience in the rehabilitation of sick projects, I can classify them into

three types:

1. Projects that economic and financial crises had overtaken since

the latter part of the 1990s which saw their complete closure and which

stagnated for 2 years or more before they were re-opened for

rehabilitation. This is the sickest type in terms of deterioration because they

were left entirely to the mercy of the elements without any effort expended

in preserving the quality of the completed works or in preventing them from

further deterioration by proper maintenance.

2. Projects that were operationally stopped upon the issuance of

the court’s temporary restraining orders and the subsequent court litigation

between the owner and the contractor for contract violations by both and

for non-compliance with plans and specifications by the contractor and

non-payment of alleged accomplishments by the owner. The project was

the sure loser where the court battle was a long-drawn affair.

3. Projects that the contractor had to abandon due to financial

losses resulting from abnormal slippages and sub-standard materials and

workmanship which often leads to a take-over of the project by the owner

or it is awarded to another contractor deductible from the original

contractor’s contract. The usual cause of this project abandonment is the

underbid price of the winning contractor coupled with managerial and

technical incompetence.

With this clarificatory explanation of terms and types of sick projects, let me

go back into the main topic of this seminar by asking this question: How can

a sick project be rehabilitated? Offhand, the ready answer I can give is the

application of the right project management. It should be understood that

the use of the wrong project management can even get a healthy project

into the sick list.

However, I am reserving for the later discussion the project/construction

management that I know from experience is the right one to prevent a

healthy project from getting sick and to cure a sick project by making it get

well. Meantime, let me give you some of the sick and almost dead projects

we were able to rehabilitate successfully. The focus of our concern in these

projects was to determine the most urgent problems and provide the most

practical solutions to them.

1991 Rehabilitation Program for Earthquake-Damaged Secondary

Schoolbuildings in Metro Manila – Araullo High School, Roxas High School

and Ramon Magsaysay High School

When we were hired to rehabilitate these heavily damaged buildings, the

DPWH had already conducted its investigation and recommended for

demolition what it listed down as condemned buildings. As we personally

made an ocular inspection of these condemned buildings, we decided to

have a second opinion on the cracks on the beams, columns and walls

which, to our judgment, did not adversely affect their structural stability.

True enough, the good structural engineer we hired concurred with our

judgment and recommended the proper remedial measures. After these

remedies were done, the rest of the rehabilitation work followed routinely.

These rehabilitation work put the condemned buildings back to use and

occupancy which meant a savings to the government instead of losses if

demolished.

Ongoing Rehabilitation of Critically III Mega Projects – Shopping Complex at

Imus, Cavite and Baclaran, Parañaque, Metro Manila and 42-Storey High-

Rise Building at Ermita, Manila

Several weeks before our contract with the general contract took effect,

we secured all the necessary documents and the data from which we re-

estimated each project item for item, computed for the total

accomplishment against the budget as well as the cost to compete the

remaining works. After we had determined the total days of delay, we

required all project participants to submit their respective revised schedules,

on the basis of which we consolidated them to draw up the overall Bar

Chart, S-Curve, Manpower Requirements, etc. in conformity with the

projected completion date.

We also prepared the final costing for change orders and additional works

based on the newly revised plans and specifications and budget for the

balance of uncompleted works. We identified the funding problem and

operational constraints which had to be resolved to put the project back

on track.

Armed with the needed comprehensive Status Report on where the project

stood including the technical and accounting aspects of project

rehabilitation, we met with the owners, architect, designers and marketing

officers to present the difficult problems to overcome and the pragmatic

solutions to turn around the project in the right direction. We made it clear

to them that the ideal solution was to start with a clean slate. Meaning to

say that if we could right away replace all the existing project personnel,

subcontractors, etc. who were deadwoods with our own men, we could

definitely say what to commit and how much we could deliver at a given

time.

Because our hands were tied by securing of tenure and due process

requirements of the law, we had to retain most of the deadwoods and

gave them the chance to prove themselves but under the new rules of the

game we set and expected them to follow if they did not want to foul out

before the gave was over.

In line with our policy of fair play, we upgraded their present wages to the

latest rate to the latest rate of the minimum daily wage and other benefits

they were entitled to under existing laws but were denied to them.

Experience has taught us that the two great deterrents to high productivity

level are non-payment due benefits under the laws and late payment of

their weekly wages.

In our initial meetings with the project supervisors and technical staff, we

repeatedly stressed the necessity of working together as a team. That

cooperative and coordinative effort is a must for one and all because the

project is the individual and collective responsibility of all project

participants. No one should think of his work to be his only responsibility but

must always look at doing it in relation to its effect on the work of others.

Accordingly, we imposed sanctions against non-compliance with these

obligations they have to one another.

A few months after we had installed the right management organizational

structure affecting the functional realignment of responsibilities, especially

the daily monitoring of the daily activities, many of the deadwoods

voluntarily got out while the due process of weeding out the rest of the

undesirables went on without let-up. When the entire project manpower

had been substantially replaced by men of our choice, the control and

direction of the whole project had gradually shifted to us and overall

productivity visibly went up in terms of completed works and workers’

morale.

Today these once very sick projects have been turned around after the

cancerous growths in their bodies had been surgically removed and their

failing health restored by remedial treatment.

At this point, let me draw your attention to the fact that all the aforenamed

projects we rehabilitated are examples of the curative function of project

implementation. At the jobsite, problems delays, cost overruns and poor

workmanship recur with regularity so much so that they are assumed to be

inherent in construction. But if these jobsite problems are searching

analyzed, their main root can be traced to the following:

Incomplete Plans and Specifications and Their Manifold Revisions

More often than not, the construction of a project is started with very

incomplete plans and specifications, usually without the necessary details.

Moreover, these said plans are issued to the field on a piecemeal basis in

the course of construction.

The owner hires an architect to design the building and who at the same

time acts as his representative/consultant on the project. He also hires the

designers for specialty works: structural, mechanical, electrical, sanitary,

architectural, etc. who commence their preliminary designs based on the

initial floor plans/elevations of the architect.

Sometimes, even before the contractor can start the project, changes or

revisions for the owner and architect take place, and many more revisions

come as construction goes on especially after the specialty designers have

submitted their respective designs, and discrepancies or conflicts are

discovered within the individual designs. Altogether, these continuing

changes or revisions along with the shop drawings requiring the approval of

the designer concerned necessarily extend the original time schedule and

increase the original budget.

It is to be noted that the seemingly endless revisions of the plans and

specifications are disadvantageous to contractors who are poor in

documenting their legitimate money claims, not to speak to their

reluctance to bill little amounts of valid claims for change orders out of their

timidity or fear of falling out of the owner’s good graces. In fact, even when

their delays can qualify for time extensions, they may not have the courage

to claim it in the absence of documents to support it. So, they may instead

end up paying liquidated damages that is deductive from their billings.

Unreasonable Project Cost Award

Bidder and owner are not on an equal footing when it comes to the

bidding of projects. The owner is at a vantage point to “extort” from bidders

the lowest limit of the desired winning bid price. As a general rule, after

three lowest bidders known, the owner offers to his preferred bidder (if he is

not the lowest bidder) to at least match the lowest bid to nail the contract

award. Once this preferred bidder agrees to the owner’s offer of matching

the lowest bid, the latter usually will not let go until he gets a substantial

discount from the former. Bear in mind, that some contractors may bid even

below the bare cost of the project because they have core group of

technical men to maintain in the hope of at least breaking even.

It is to be expected that where the contractor has to make do with a

contract price that the owner has squeezed dry, the former is eventually

compelled to cut corners when he can by scrimping on materials,

underpaying his workers and sacrificing quality to survive. As contractors run

short of funding, delays and slippages are incurred and do recur that surely

slow down the pace of work until it finally comes to a halt. This is what

makes a project sickly and critically ill.

Practice of Undercutting on Professional Fee

With the recognition and acceptance of the importance of the services of

Project/Construction Managers by project owners as their best assurance of

getting their money’s worth, many firms and professional groups have

mushroomed in the playing field, dominated by a few smart operators.

Unfortunately, they resort to unethical ways to corner the crowded market

for premium projects.

Undercutting one another has been the prevailing practice of some

professional who are willing to offer or accept a service fee that is as low as

0.70%. I understand that the supervisory fee charged by the DPWH is 3.0%.

Again, the hard-nosed tactic of the owner in price negotiation applies to

professional fee. My experience has taught me the embarrassment of

offering 1.0% to 1.5% fee which is way below NEDA approved standard

rates and to be told that it is way above the prevailing market rate.

The puzzling question is: how can a Project/Construction Manager fulfill his

contract at a fee of 0.70%? Like the contractor who accepted the contract

at almost no mark-up, the Project/Construction Manager will not be able to

provide the right number of technical administrative and accounting

personnel in the implementation of the project. The Project/Construction

Manager will seek the favor of the contractor by shifting some routine

activities to the latter and by obtaining required information and data to

make his regular reports to the owner. As this is a case of “you scratch my

back and I’ll scratch yours”, the Project/Construction Manager will return

the favor by playing blind to the contractor’s violations of his contract. So

the project becomes afflicted with delays, sub-standard materials,

defective works and poor quality.

The end-result is a sick project caused by both the owner and the Project

Manager. The very low price of the contract which the owner considers as

savings is actually a loss. The real loser, however, is the contractor who

cannot depend upon the Project Manager to protect him as the project is

his contractual responsibility and he is directly accountable for his

performance.

As earlier said, rehabilitating a project is curative. The point in tracing the

root of project sickness of these three prevailing practices in the playing

field (incomplete plans and specifications, unreasonable project cost &

undercutting in professional fee) is to give the preventive aspect of project

implementation the importance it deserves in terms of time, cost and

quality.

In a capsule, what I am trying to say is that if the plans and specifications

including details are complete and the owner gives the reasonable pricing

for the construction contract and service contract, the construction and

completion of the project will be assured of an honest-to-goodness

compliance with the approved plans and specifications, time schedule,

budget cost and quality standards. Meaning to say that the progress of

construction work from its inception to its completion will not be attended

by repetitive defects and deficiencies which are presently considered

normal.

Projects are conceptualized, crystallized and distilled at the pre-planning

level of the pre-construction Planning Group. All the owner-commissioned

designers (structural, mechanical, electrical, sanitary, architectural, etc.) led

by architect should sit down together with the owner for an exhaustive

discussion and comprehensive agreement on the various requirements that

will enter into their respective designs. After all the different design concepts

have been defined and further refined in subsequent meetings, a final

meeting must be held for further fine-tune the designs against the full

requirements of the owner so that each to the other and all are well

coordinated in every detail to remove any discrepancy or conflict therein.

It is pertinent to point out that the only mega project I know which comes

nearest to achieving the construction of a project with complete plans and

specifications is the new Citibank Building at Paseo de Roxas Avenue,

Makati City. I was fortunate to be involved in its pre-planning period of

almost two years as one of the Project Consultants. The owner wanted the

project to be completed within the target date once its construction went

underway and it was done accordingly.

Needless that I go to a detailed account of the pre-planning activities

except to say that its Planning and Design Staff produced the complete

plans and specifications for the Citibank Project. Only minor revisions were

made which did not disturb the smooth implementation of said plans.

Change orders and additional works were very minimal. Overall, the

completion of the project did not have the typical symptoms of a sick

project.

Equally important is the right price for the construction contract and the

right fee for professional services. When a contractor or

Project/Construction Manager is paid at a price so low that he cannot

comply with his contractual commitments, the owner will in the end get the

short end of the bargain. This is because the contractor or

project/construction manager will do everything possible to stay viable so

that to compensate for his funding shortage he will be forced to

shortchange the owner in terms of slippages, inferior materials and sub-

standard quality.

Owners must be aware of the negative after effect of denying contractors

or project/construction managers the fair and equitable mark-up in their

contract awards. And the same advice applies to contractors or

project/construction managers who unethically offer and accept prices

that reflect cutthroat competition. Unless the contractors or

project/construction managers get the right price for the owner, the owner

cannot really get the right Project/Construction Managers for the project.

What I have just explained is the preventive means of ensuring the healthy

condition of any project which is really the principal key to the successful

rehabilitation of a sick project. More than half of the present jobsite

problems such as delays, cost overruns, poor workmanship, etc., will be

substantially reduced in their number, recurrence and frequency, if plans

and specifications are complete, contract price and service fee are fair

and just. The sick conditions that normally afflict projects will be prevented

and the health of the project can be sustained up to its completion.

Nevertheless, whether a project is in good health or in bad shape, what is

first and foremost to keep the former healthy all the way and rehabilitate

the latter to its full recovery is not only to manage them right but also to

know the right project/construction management to implement.

Due to time constraint, I am only going to present the general features of

the right Project/Construction Management System. In speaking of the right

project/construction management, I am referring to the kind of

management that is responsible for maximizing the use of six (6) resources to

ensure the completion of the project on time, within cost estimate ad to the

desired quality.

THANK YOU!!!