Inaccurate Field Reporting and Its Impact on Business Decisions October 3, 2019October 3, 2019 HMdev1 Contributed by Chad Ingersoll, Director of Project Controls _____________________________________________________________ Inaccurate Field Reporting and Its Impact on Business Decisions It is an exciting time right now as an EPC contractor along the Gulf Coast due to a new wave of capital spending throughout our industry. We are also entering an era in which technology is the new norm and where companies are capturing and analyzing data to help drive business decisions, develop strategic growth initiatives, and setup stability plans. These decisions vary and affect a wide range of results whose impacts are both immediate and long-lasting. The margin for error is low for capital projects. The need for successful project delivery is crucial to stay competitive and support repeat business. Two key factors when managing successful project delivery include accurate progress reporting and accurate timesheet reporting. I don’t know how many times I have seen timesheets submitted where the hours just didn’t add up, the incorrect cost codes were used, the list goes on. Unnecessary business decisions can happen when these inaccuracies occur. Effects of Inaccurate Progress Reporting A common example of inaccurate reporting is when crews “sandbag” their progress. “Sandbagging” refers to crews that fail to report progress when productivity is excellent and/or they had a big week in earnable hours and intend to report that progress later, perhaps on a rainy day, when things don’t go as well. This is never acceptable. It creates a culture of deception within the organization. This tactic does not work in the long term, typically resulting in costly progress audits amongst many other issues. This type of behavior and inaccuracy is detrimental to any project and the roots of these problems are far-reaching. Practices like “sandbagging” and other progress reporting inaccuracies can have immediate impacts for a contractor. Over-reporting progress paints an incorrect picture to management. Oftentimes, a knee jerk reaction to this news can lead to a decision to not to add personnel to finish up a project which can lead to a strain on company resources. Once true progress is realized, the added cost to quickly staff up, train, and execute more work in less time is ineffective and will quickly sink a project. Hidden financial burdens associated are usually unidentified until it’s too late. (i.e. Grossly high progress related billings or cash flow availability). It’s not all about the ballooning cost of the project, but the safety of new personnel, the quality of work, and the availability of trained resources. An overly saturated project team eats into productivity and many processes and procedures can begin to deteriorate. Another effect to consider from inaccurate progressing is focused around the bid stage. Companies oftentimes choose to strategically bid work with a tight window to de-staff current projects and roll onto another. This leads to a false sense of completion and resource availability, which can now be in jeopardy. The opposite reaction can occur when a company believes the date of completion will not be met and strategically opts to not bid certain projects. This can lead to a delayed backlog of work forcing a company to possibly layoff at the completion of current projects. Effects of Inaccurate Timesheet Reporting The detail to which an employee’s time is charged against also affects how a company makes decisions. Most companies typically utilize a standard code of accounts. If employees are not familiar with what the code of accounts represent, they may disregard them which ultimately causes inaccurate timesheet reporting. This may seem like a minor issue and can be adjusted in a review cycle, but these effects run deep in an organization. Most companies use their code of accounts to gauge performance and cost of a task or group of tasks. Over time, if these codes of accounts are incorrectly used the value or unit rate for each code is now misrepresented. When misrepresentation occurs, it is possible a company will make a strategic decision not to conduct a specific type of business, as historically it’s not been recorded as profitable. Or perhaps a company makes unit rate adjustments for upcoming bids, the primary scope of work for the projects is in line with several code of accounts that have seen a decrease in unit rate due to excellent past performance. This is a positive for a company believing they are more competitive than the next. However, during the execution of the project they quickly find out their unit rates are low, and the project cannot be executed at the price it was contracted at. Like the previous scenario, historical data reported may increase unit rates for a company. Over time the company may find it difficult to be awarded work due to the false rise in cost represented for bids submitted. These are both long-lasting, deep effects for contractors. Effects of Inaccurate Field Reporting on Owner/Operator Companies For owner/operator companies, inaccurate field reporting causes its own set of problems. When contractors are unsure of their true numbers there is an increased chance the owner will have to pursue additional funding or deal with a mountain of change orders to start a project. These inaccuracies can also lead to overpayment for incomplete work or even becoming liable for increased labor costs on a reimbursable contract. Owners want a high probability that project completion will be in line with critical schedules and budgets. When that doesn’t happen, they can quickly lose confidence in the contractor for not effectively planning the completion of their work and decisively exclude them from future opportunities. Ways to Overcome There are many ways to overcome inaccuracies in timesheet and progress reporting. Not all solutions require costly or complex overhauls. Technological advancements in our industry are growing, with options ranging from mobile software platforms and ecosystems, electronic timesheets, Artificial Intelligence (AI), RFID tagging, to drones 3d mapping. The use of technology is not the only way to implement adequate solutions, training and education is also very important. Modifying or establishing a new simplified code of accounts structure, development of work processes (Advanced Work Packaging), or launching education programs where cyclical training occurs, are all adequate improvement solutions as well. Each company will experience differing levels of reporting deficiencies but the one thing that must be addressed is the culture. In support of all the work processes, or technological change a company makes, a strong culture of accountability will drive people to demonstrate high levels of ownership on the information reported. With tough competition throughout the Gulf Coast, distinguishing yourself as an industry expert is critical. These issues have the potential to harm contractor reputation in the eyes of Owner/Operators. This is where ensuring simple things like accurate reporting can help an organization stand out. It’s imperative that clients do not lose confidence due to inferior decisions being made. The pursuit of reporting perfection is no easy road, but a necessity to maintaining customer relationships, ensuring repeat business, and continually making the right business decisions. __________________________________________________ Chad Ingersoll, Director of Project Controls B.S. in Construction Management Chad has 15+ years of experience with EPC Projects working primarily in the downstream oil and gas industry. His past experience prior to joining H+M was leading multi-billion dollar EPC Projects as a Sr. Project Controls Construction Coordinator/AWP Manager constructing polyethylene units for multiple clients. His current responsibilities include schedule control using Primavera and cost and budget control using advanced progress methods for engineering and construction.