Profit warning project delays Ellis Fox Blog

Profit warnings and project delays, just another day in construction…

You would think by now we know the industry and come to expect the inevitable project delay or profit warning. Yet somehow the industry still manages to be surprised when they are announced. Makes one wonder which reality they’re living in. If for months and years it has been the same old story and there’s no real change in the way things are being done, how can people possibly expect a different result?

Yet they do. Maybe its misguided optimism that things will be ok in the end, after all projects are a work in progress. Maybe it’s the pipe dream that somehow lost time can be made up or maybe they’re just so used to the white knuckle ride that there’s little thought regarding an alternate solution.

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To be honest I wouldn’t want to be a CEO in construction right now. It may be a top job that pays a small fortune but it comes with one headache after another. True CEO’s are the driving force behind the organization deciding on the vision and direction the business will take, but the way the industry is going at the moment, it seems more likely they’re spending their time putting out some rather large fires, trying to keep the company’s head above water and their head off the chopping block.

Reality check – what’s happening on the ground?

There is always great fanfare when new contracts are awarded, but the optimism is short lived. Instead of injecting fresh cash flows to boost revenues, these new projects become the band-aid to cover up the messes of the projects already in progress, and which aren’t going according to plan. Cost increases and project delays very quickly erode projected profits. Crossrail is prime example of this. A high profile project, providing a much needed service to the City of London has been hit with so many technical and financial delays, they’re now giving themselves a 6 month window for a completion date.

There are calls for better collaboration between contractors, for stronger planning and risk mitigation, yet the number of projects completed on time or within budget are few and far between. They’re the exception rather than the norm. Now if you really wanted to surprise the construction industry, shouldn’t avoiding project delays be something to prioritise. In the process one might manage to avoid those pesky profit warnings too.

Related topic: How can Tier 1 Main Contractors shape the industry for the better