Industry Insight No. 21: Project Management in the USA

November 22, 2017

This article was first published by Lexis PSL on 15 November 2017.

 

Construction analysis: Sarah Schütte of Schutte Consulting Limited looks at project management in the US construction and engineering industry, and compares it with the position in the UK.

 

Since my last article focussing on project management in the UK and US (see Industry Insight No.5: Making project managers ‘great’), there have been developments in industry and in the socio-economic-political landscape. These include:

In among all this, industry across all sectors is trying to develop new ways of working (eg artificial intelligence), plan for sustainable growth, engage Millennials, deal with new procurement rules (eg anti-slavery, new US Defense Contract Management Agency Guidelines) and financial and data regulation (eg the General Data Protection Regulation, see link to blog here). It is a tough time.

 

 

Project management is becoming more visible within organisations, but is not yet at the heart of operations. The Project Management Institute (PMI) estimates that an additional 1.5m project management jobs per annum will be required globally in the next ten years.

 

Although project management as a profession originated in the US about 50 years ago, there are sizeable gaps in organisational maturity and approach to the project management function.

 

Just before he left office, former President Obama signed the Program Management Improvement and Accountability Act of 2015. Perhaps this explains my observation that there are available increasing numbers of very good training workshops and that professional associations, eg PMI, which champion project management, are getting their voices heard at the highest political level.

 

What is the position in the UK construction industry?

The UK has been quietly producing some very competent project managers, who are able to take this knowledge and experience to other countries, in particular in the Middle East, where construction and engineering projects have taken off again after a few slow years. Demand is increasing and, given that project budgets in this region can be at the ‘major’ and ‘mega’ level, the job of the project manager requires multi-skills. Notwithstanding, there is work to be done to raise competency to a consistently high level. It should be the case that a superb project manager comes as standard on a project.

 

In my view, I am certain that three things have been driving forces for the UK’s progress in the construction and engineering sector:

 

1. Legislative framework: The HGCRA 1996
The Housing Grants, Construction and Regeneration Act 1996 (HGCRA 1996), as amended, has:

  • Broken poor habits of cash flow practices (though payment adjudication is under-used, and cultural change is still needed)

  • Promoted a more balanced outlook on contracting arrangements, eg the right to suspend services for sums due and unpaid (HGCRA 1996, s 112)

  • Brought to the top the importance of putting a contract into place, which complies with minimum standards (and there are consequences if it does not)

  • Highlighted the need for competent project management and the potential impact on a project

     

In my experience, the HGCRA 1996’s main purpose in regulating payments and the timing thereof, coupled with a statutory right to refer any dispute at any time to adjudication, makes it a reckoning force. Other jurisdictions have introduced similar legislation e.g. Ireland (see Industry Insight No.20: Construction adjudication in Ireland).

 

2. Contracting framework: NEC contracts

In the last 15 years I have seen increased use and adoption, and adaptation, of the NEC form within the UK construction and engineering industry. The Project Manager is at the heart of the project and, together with the planner and the programme (schedule), is the driving force for project delivery. The structure of the contract and the tools provided through the standard clauses (eg early warning process, programme submission/assessment cycle) are very effective when operated correctly.

 

3. Professional support: The PMI and the APM

The two professional associations for project managers in the UK, the PMI (headquartered in the US) and the UK’s Association of Project Managers (APM), are tireless in their efforts to raise the profile of project management. The APM has c. 23,000 members and the PMI has c. 3,000 (though of course numbers do not tell the whole story, since some individuals are members of both, and many practitioners hold no membership). They drive visibility of the profession through willingness to share collaborative knowledge throughout industry (eg through free or subsidised events, visits to schools etc).

 

What are the key similarities and differences between US and UK project management?

The key similarities are:

  • Organisations are being restructured to be more project-based, and therefore looking to recruit more project managers

  • Increasingly, projects are being split into ‘bite-sized’ mini-projects, with mini-budgets and mini- programmes. There is also an increase in the creation of a project management office—a department charged with managing the portfolio of projects (see Industry Insight No,10 and No.11: The future of portfolio, project and programme management—parts 1 and 2)

  • The average age of a project manager is over 45—succession planning is a must, and many organisations are struggling with this

  • Project managers need a variety of tools to properly fulfil their duties

  • Projects fail for similar reasons:

    • scope change

    • mismatched expectations

    • poor contract drafting

    • poor execution (ie poor project management)

Project management in the US is different in the following key ways:

  • There is no equivalent adjudication process for wrongful withholding of payments due—you can obtain a lien but it is not as straightforward or cost-effective

  • There is no equivalent contract form—the NEC is readily adaptable to the US, but industry is firmly wedded to home-grown contracts

  • The geographical spread, and individual State laws, of the US makes local contracting more prevalent

  • US project managers rarely have to deal with currency issues due to financial subsidies to buy local and a broad national manufacturing industry, which obviates the need to import

  • The US imposes its own project controls and risk management standards for contractors to meet, eg the Defense Contract Management Agency’s 14-point metrics, expanded as of March 2017 to 131 metrics within 32 Guidelines, applicable to all new projects

  • The US has a legislative framework for programme and project management as of December 2016

     

What’s in the pipeline for project managers in the US construction and engineering industry, and what impact might this have on the UK?

 

President Trump has signalled intentions via Executive Order to bring about some very ambitious plans for federal spend. At the time of writing, the following plans will require project managers at every level of experience and expertise:

  • Upgrades to road and rail infrastructure

  • The Mexico-US border wall (the contracts for first prototypes have been awarded)

  • Increased defence spending on aircraft, weapons and reconstruction

     

The immediate impact on the UK is likely to be negligible. But the drive for more project managers and consuming products may push up costs, notwithstanding that a lot of the US’s needs can be met at home. The UK civil service is close its US counterpart and regularly consults.

 

I am seeing more demand in both the UK and the US for training on risk management, project strategy and in compliance. Finally, project managers are getting the recognition for, and being given time for, the training that they need and deserve.

 

What are the challenges for project managers in the US, and is this similar to the situation in the UK?

The requirement for multi-skills is the biggest challenge. No project manager can be, or should be expected to be, an expert in all project areas. However, basic training in project set-up, risk, governance and finance is a great place to start. Add to this some training in basic contract law and dispute resolution, eg alternative dispute resolution, and you start to build a well-rounded project manager. The UK faces the same challenge.

 

Due to one of the differences, however, you could say that the UK faces a greater challenge to up-skill project managers: this is adjudication. I am seeing increasingly-complex disputes referred to adjudication. Project managers are necessarily at the heart of this, for example the NEC Project Manager or JCT Contract Administrator (which does not really require much active ‘management’ in truth). Project managers in the UK would do well to be well-versed in techniques for how to avoid claims arising. This aligns to fulfilling the contractual engagement properly and fairly, which is difficult in practice.

 

Most adjudications stem from arguments over money, and underlying these arguments is a certification (or not) of an event which one party insists is an ‘extra’ and which the other party refutes. A mistake by a project manager in this arena, which causes a party financial loss, or loss of opportunity, could be professional negligence.

 

Another major challenge is in the technical understanding of the contract specification and outputs. A project manager who is not an expert in the engineering aspects of the project will need to take advice and be guided by the technical representatives of both parties. A novel, or highly technical project, will be best served by a discerning and inquisitive project manager.

 

What about the use of software?

From speaking to those in the US industry, there appears to be an expectation that software cures all ills. Many customers repeatedly suffered the same problems of time and cost overrun, and wondered why—on gentle probing, it turned out that the data inputter had made a mistake, and therefore the programme was incorrect, or the projected cost was skewed.

 

My experience is that UK construction and engineering organisations are less reliant on software. They invest in it because their clients tell them to, or because their programmes are going to be scored using a particular product. Most UK projects now are using the very basics—in effect a project database, a common environment, which both parties can access and create communications. A more mature organisation, or a larger project justifying the attendant cost, might employ a more sophisticated system, which can tie in the communications and link them to the programme and the costs data.

 

 

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