Pre-Contract Planning
Detailed project planning prior to contract award is not as common in construction as you might think. Research reveals that traditional procurement processes typically select a contractor and move directly into contract award without any formal project planning. Reasons given for skipping a planning step prior to contract award include:
- A perceived lack of time.
- Deficiencies in organizational expertise.
- No real drive to thoroughly perform pre-planning tasks.
The Benefits of Planning
Construction industry research points out that poor planning is at the core of delays, cost overruns, and owner dissatisfaction. Effective planning, on the other hand, has been linked to enhanced construction project performance, resulting in benefits such as cost and time savings, clearer project scope definition, and a reduction of change order frequency. For those reasons, we find it remarkable that proper project planning is not a mainstay of the construction industry. In response to these limitations, we would like to propose a brief, yet rigorous project planning method called the Pre-Contract Planning Model.
The Pre-Contract Planning Model
The Pre-Contract Planning Model is unique in the industry and, we believe, will become an essential management tool because:
- It occurs after the bidding process and prior to contract award.
- It enables all agreed to deliverables from the planning process to be included as a part of the final contract.
- It serves to facilitate greater risk transfer from owner to contractor.
- The Pre-Contract Planning Model serves as an operational plan for the execution of the project.
- This operational plan includes a milestone schedule of operational activities and interactions.
- It also serves as a technical plan of key delivery approaches that will be employed by the contractor.
- It is a risk management plan.
- It identifies owner action items.
- It provides high levels of clarification beyond the selected contractor’s base proposal in the bidding phase.
- And it results in more effective project team alignment once the construction phase commences.
Put to the Test
Results from a multi-case longitudinal study documented the impact of the Pre-Contract Planning Model in terms of three success criteria: cost growth, schedule growth, and owner satisfaction, where cost and schedule growth were measured as percent increase of initial contract values. Projects that implemented the Pre-Contract Planning Model were compared with a control group that operated via a traditional project delivery process where the selected contractor directly proceeded to contract award without a formal planning process. Analysis revealed that the Pre-Contract Planning Model reduced cost and schedule growth by as much as 54% and 70%, respectively, indicating that pre-contract planning is a viable planning mechanism to be implemented in the construction industry.
Further Research
This study enabled an apples-to-apples comparison of real-time construction projects, which is a rare opportunity in the field of construction industry research. Future research will hopefully incorporate results of medium and large-scale construction projects, which would build upon the data set presented in this study. Another consideration for future study is to track the source of each change order as well as its associated cost and schedule duration impacts in order to better understand the cause of impacts, which will shed additional light on their relationship to planning (or a lack thereof) on the project.
Conclusion
Some form of pre-contract planning is here to stay as a construction industry best practice. Contractors should begin to audit the skill-set and time management required to incorporate pre-contract planning into their everyday business practice. We will follow-up this introduction with more detailed information on this site in the future. Watch this space.
Read more about Partnering Procedures that Reduce Change Orders
