Imagine you are at a gun range. Once you pull the trigger, the bullet’s trajectory is set. The bullet will eventually land exactly where it was aimed no matter how long it takes to reach the target.
This analogy accurately describes a construction project from the Owner’s perspective.
· The GUN is the construction contract.
· The TRIGGER is the Owner’s signature on the contract.
Sophisticated Owners realize that once the trigger is pulled it will lose much of its power and the bullet is likely to go precisely where the gun (i.e., the contract) is aimed.
Many Owners, particularly unsophisticated Owners, are blinded by the honeymoon period and forget that the beginning is critical. Mistakes that occur at the beginning of a construction project may appear insignificant and/or correctable. However, in most instances these mistakes will affect the project’s conclusion (i.e., the bullet’s trajectory).
It is leadership’s responsibility to ensure that the beginning of every major project has the proper focus and attention to detail. To be effective, this focus should be on establishing obligations among the parties. And, to ensure that these obligations are enforceable, they typically must be contractual obligations.
Historically, Construction Projects have been the responsibility of the Owner’s Facility Department and/or its construction executives. This is no longer the case. Due to growth of construction costs, complexity of the work, and the advent of Artificial Intelligence (AI), a Construction Project is really the responsibility of the entire Owner enterprise (i.e., institution, organization, or simply the Project Owner), including its senior leaders and its board of directors (BOD). Gone are the days when a senior leader (i.e., CEO, the BOD, or other members of the C-Suite) could off-load responsibility for a construction failure by saying, “let’s fire the construction executive who was in charge when the failure occurred.”
The failure of a Construction Project to meet expectations is usually the fault of the entire Owner organization.
It is the responsibility of the Internal Audit (IA) Department to ensure that Owner’s senior leaders are never surprised either before, during, or after construction. And, since the IA Department’s leadership is typically counted among the Owner’s senior leadership group, IA will find that part of the anger caused by a failed construction project will rightfully fall on them.
It is said that auditors “bayonet the wounded after the battle is complete.” This is a simplistic view that both the world and the IA professionals have moved beyond. The National Association of Construction Auditors (NACA) defines a construction audit as “a comparison of expectations with results,” where the expectations are defined by senior management and codified in the Project’s ICs. Expectations are controlled with the Owner’s ICs. Consequently, the IA Department must understand leadership’s expectations and the ICs that will support reaching these expectations.
To be successful, IA cannot simply “bayonet the wounded” and then crow about how much money the Owner may be able to claw back (or more typically, crow about how much money should have been clawed back). IA should not focus on the “got-ya” goal of identifying excess costs because this does not serve the enterprise in the long term. Ideally, the IA Department must focus on supporting the success of a construction project from its inception to its completion. AND, finally, the IA Department must make recommendations for improvement to the IC’s on subsequent projects.
To do this, IA must be a “trusted advisor” to the Owner’s senior leaders. [1] The IA must be knowledgeable and proactive. IA must 1) understand leadership’s goals, 2) understand what ICs are critical to these goals, 3) design and perform tests to confirm the existence of the ICs, and then 4) follow up with tests to confirm that the ICs are being used during the project. Throughout this process the IA must be:
· Cognizant of what is normally used to control a Construction Project.
· Knowledgeable of new data collection tools that are currently, or some to arrive, on the market. [2]
· Knowledgeable of Predictive Artificial Intelligence (AI) and how it will change how Owners manage construction projects.
These final factors are critical because every comprehensive construction audit report will include the best practice recommendations that the auditor hopes will be considered and/or incorporated into the enterprise’s next Construction Project.
[1] Due to the growth in complexity of large enterprises, (e.g., hospitals, universities, utilities, casinos), the IA Department is really the backstage pass to the entire organization and a great place to kick off a career that targets reaching the C-Suite.
[2] Data Collection Tools, both current and new (e.g., drones, biometric readers, phone applications with GPS trackers, video systems for ingress and egress)
