The First Best Practice
for All Construction Contractors
By Matt Stevens PhD and Jennifer Day PhD
Every construction contractor knows that delivering good craft skill is non-negotiable in running a
good construction contracting firm. Furthermore, most construction contractors have a set of good
practices that work for them. What many have not yet considered is that there is a first best practice
that, when implemented, delivers more-consistent, more-sustainable results across the industry.
This first best practice is compliance to processes.
Best practices have garnered much attention in construction over the last decade. The term is still a
buzzword among many professionals in the industry. Construction contracting still does not have a
definitive list of universally-agreed best practices. Much of the discussion is driven by opinion. There
appears to be an opportunity to raise the conversation in our industry up to the level of other
industries.
One challenge in construction is to be more definitive about which practices sit in which bucket
(best, good, and poor practice). However, this is not enough. Contractors have to implement these
practices consistently and diligently. Monitoring adherence to what works is the best way to improve
the essentials in construction, timeliness and quality of effort. Obviously, construction firms that
consistently adhere to best practices, win more of the time.
Processes and Their Practices
Best practices can be classified into five sets of processes that must be done by any successful
construction contracting firm: 1) Work Acquisition, 2) Installing Work, 3) Financial Management, 4)
Business Management and 5) Human Resource Management. Each is self-explanatory. From these
5 overall processes, there are hundreds of practices.
These practices range from small, daily decisions like which supplier to pay first, to large, significant
decisions like whether to stay small or grow strategically. To define broadly, practices are those acts
which can be viewed, measured or inspected. Either through file inspection, work review or
observation, these proactive actions are focused on producing a result. Each practice done well,
affects safety, quality and productivity. Obviously, these processes and their practices occur
simultaneously, good or poor, and are executed each day.
In our research and testing, a majority of construction contracting practices are not executed by the
company owner. They are executed by company staff, from field laborers to middle management.
We have studied these staff, examining how they adhere to best practices across successful and
unsuccessful firms. For 154 practices and across dozens of companies, we have done this as
follows:
1) Ask company staff must rate each practice’s importance. This taps into insider knowledge that is
formed over many experiences with the practice. Generally, industry data shows that construction
employees have worked for more than one firm. They have a perspective that is helpful.
2) Asked each staff member to rate compliance with each practice. Combined with importance,
another important metric is compliance. How often an employee complies with factors he thinks
are important, is a creditable measure as long as a statistically significant number of qualified
participants are surveyed.
As we describe below, compliance generates on-time and on-budget outcomes.
The First Best Practice Is Compliance to Processes
In our work and research, we believe the first best practice to consider and implement is to insure
compliance. This can be done several ways or as a combination of these. Electronic measuring is
preferred in many situations, although face-to-face meetings have their own unique value.
Compliance in executing practices is a straightforward concept. In our research, it has three
components:
1) Practice is performed correctly
2) Practice is executed only once (no rework)
3) Practice is performed on or before the deadline.
Certainly, practices executed with these three attributes are performed slowly and carefully; however
once done, their outcome is given to the next person for their use in producing safety, quality and
productivity. However, the question remains what is the average compliance based on these three
criteria?
From our research project started in 2010 and updated each year, it appears the average contractor
performs at approximately a 60% compliance level. This is great news for any construction firm that
seeks to gain a competitive edge. There is lots of room for improvement between 60% and 100%
A summary of this study is furnished in The Construction MBA (Stevens, 512 pages, McGraw-Hill).
There is more research which we have collected and several more insights to add. It is the basis for
our next book on Construction Organizational Productivity scheduled for 2016.
Additionally, one of our clients shared a recent set of data with us. We have worked with this
construction contracting firm since 2011 and continue our engagement. See Figure 1. There are two
take-aways from this graph:
1. that projects with higher compliance produce higher profits and are completed in less time
than originally planned
2. that our processes improve adherence to good practice, and thus profit and timeliness.
Our set of practices that we jointly created, trained and implemented with our client are not new
ideas; however, few construction contractors implement all of them regularly. This means the
capacity for increased efficiency for most firms – even profitable firms – is high. Our data
demonstrates the value of these practices within the industry overall. Our firm is experienced in
making these practices clear and legible to construction contracting firms and their range of
employees.
150%
100%
50%
Percentage Adherence
to Process
0%
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15
-50%
-100%
Profit Result versus
Planned
Time Result versus
Planned
-150%
-200%
Figure 1 – Company Furnished Data of Completed Projects Closed from 2012 to 2014 in
Sequential Order Measuring Process Compliance, Cost and Schedule Results.
Figure 1 also shows a significant improvement over 3 years. For clarity, the first five and last five
projects represent before and after adoption fairly accurately. Obviously, higher adherence to
efficient processes is correlated to improved outcomes. The first five's unweighted outcomes were
average project profit decreased (-81.69%) while exceeding the schedule (18.92%) than originally
planned from lower compliance to processes (29%). The last five project’s profit improved (48.68%)
over the baseline estimate while shortening the baseline schedule (-28.78%) with a higher
compliance to processes (92%).
Conclusion
Good ideas are many and so are the number tried and failed. The construction industry is
complicated and its contractors unique. Each has its own way of doing things. Certainly each
contractor knows what has worked best for them. They have great incentives to know this. Those
incentives include keeping their construction business alive and thus, working only for themselves.
Obviously, any company can improve their outcomes by using superior methods. Even the best
companies (or people) don’t do everything well. Remember, success is a relative, not absolute
measure.
Many best practices in construction contracting have yet to be convincingly demonstrated as such,
even though someone is convinced. Realistically, every new practice introduced into a firm’s
operation will have ripple effects to other areas due to the complicated nature of our industry.
Evidence of viability should be demanded by construction contractors contemplating adoption of
new practices.
If a firm is focused on improvement, the first opportunity is improving compliance to existing
processes. Given the data above, dramatic increases can be realized. It is our belief that construction
contracting can be a straightforward or a complex one, depending one’s perspective and approach.
Matt Stevens PhD is President of the Management Advisory Firm, Stevens Construction Institute,
Inc. which works exclusively with construction contractors. His industry experience
spans over 35 years. He authored two industry books Managing a Construction Firm on
Just 24 Hours a Day (416 pages) and The Construction MBA (512 pages) published by
McGraw Hill. Stevens’s advising work focuses on Strategic Planning, Business
Evaluations, Best Practices, and Productivity. Reach him at [email protected].
Jennifer Day PhD is a management advisor with Stevens Construction Institute, Inc. Her areas of
expertise include civil engineering and economics. Day received her Doctorate from
the University of California, Berkley and has authored or co-authored publications
ranging in topic from transport mega construction projects to productivity to dispute
resolution. She has presented her research at dozens of conferences throughout the
world. Her engagements include the World Bank and national governments. Day’s
advising work focuses on Strategic Planning, Business Evaluations, Best Practices,
and Productivity. She may be reached at [email protected].