Ten Tips for Assessing & Turning Around a Distressed Construction Project, by John Yeung, Vice President, Beacon Consulting Group
Construction projects can become "distressed" for a wide range of issues, such as:
- Poor project management
- Contractor or subcontractor insolvency
- Supply chain issues
- Subcontractor delays
Regardless of the root cause, the stakes are high for all parties involved. Surety companies, in particular, must often step in to ensure the project is completed as required under the terms of a surety bond. Successfully turning around a distressed construction project requires expertise, clear communication, and a structured approach. Below are ten key tips for assessing and managing the turnaround of a troubled construction project.
- Conduct a Thorough Assessment. Start with a detailed review of the project’s current status.
- Evaluate the work completed to date versus what remains.
- Review all relevant project documentation, including contracts, schedules, and financial records.
- Identify major causes of the delay or distress, such as poor performance, disputes, or inadequate resources. - Engage Key Stakeholders Early. Effective communication is critical. Bring together all parties involved, including the project owner, subcontractors, suppliers, and the surety company. Hold an initial meeting to establish transparency, address immediate concerns, and align expectations.
- Secure the Jobsite. Ensure that the construction site is safe, secure, and protected from further deterioration. Verify that any materials or equipment on-site are inventoried and properly stored. This step is crucial to prevent further losses or delays.
- Analyze the Financials. Carefully review the financial health of the project. This may include:
- Assess whether funds allocated for the project are sufficient to complete the work.
- Identify unpaid vendors, subcontractors, or suppliers, and address potential liens or disputes. - Verify the Scope of Work. Compare the original scope of work to the work remaining. Determine whether change orders or modifications have affected the project timeline or budget. A clear understanding of the scope is essential for moving forward effectively.
- Develop a Turnaround Plan. Create a step-by-step plan to get the project back on track, including:
- Define clear milestones and a realistic timeline for completion.
- Identify which contractors or subcontractors will remain on the project and whether new ones need to be hired.
- Outline a strategy to address any disputes or unresolved claims. - Establish Clear Leadership. Appoint a qualified project manager or leadership team to oversee the turnaround. This individual should have experience managing complex construction projects and the ability to navigate challenges under tight timelines.
- Optimize Communication Channels. Set up a robust communication plan to ensure all parties are updated regularly. Weekly progress meetings, detailed reports, and open lines of communication can prevent further missteps and keep the project on track.
- Monitor Performance Closely. Track progress against the revised plan, focusing on critical path activities. Regular site visits, inspections, and updates ensure that any issues are identified and resolved quickly.
- Learn from the Experience. Once the project is completed, conduct a post-mortem analysis to identify lessons learned. Understanding the root causes of the original issues can help prevent similar problems in future projects and improve overall processes.
Distressed construction projects are challenging, but with the right approach and expertise, they can be successfully turned around. Surety companies, construction consultants, and all stakeholders benefit from a structured plan, clear communication, and a focus on problem-solving. By following these tips, you can help ensure that even the most complex projects reach a successful completion.
