In his best-selling book, Thinking, Fast and Slow, Daniel Kahneman (winner of the Nobel Prize in Economics) mentions an intriguing idea for analyzing a project: the pre-mortem. The idea is to bring together the project team and imagine that everything went wrong. The project finished late, over-budget, and there were quality issues. So the question is, “why?” Rather than imagine all of the perceived advantages of taking on the project (new facility, more capacity, profit, etc.) the project team is tasked with figuring out all the reasons the project could become a failure. Normally, anyone with doubts would hesitate to share his or her opinion if everyone else seems to be “on board” with the project. A psychological phenomenon known as “groupthink” (a term first used in 1972) causes people to strive for a consensus within a group. Personal beliefs are set aside and the opinion of the group is adopted.
In the pre-mortem each team member is expected to provide examples of possible impacts to the project. Materials might be delivered late, equipment could break down, the plans and specifications possibly have errors and omissions, or perhaps there will be trouble finding enough workers. When you consider that any project is a unique undertaking that brings together people, contractors, vendors and suppliers who have not all worked together before, it is a wonder that any project turns out well. Never before and never again will we face these exact circumstances.
As a construction claims consultant I often deconstruct a project after it has happened in order to determine the causes of delays and cost overruns. This is useful for suing someone else (or as a defense) but is certainly not very proactive. A former boss once said to me, “there is more money to be made putting out fires than preventing them from happening in the first place.” Say what you want about lawyers and claims consultants but the reality is that if more companies tried imagining all the things that could go wrong they would not need the services of these people in the first place!
While it is easy to believe that some events are simply out of our control, this is only partially true. Would anyone imagine a construction project where the weather is perfect? Of course not. Rain, snow, high winds and extreme temperatures can – and should – be anticipated. An owner typically requires a contractor to provide payment and performance bonds because contractors have been known to go out of business. By the same token, the contractor should make inquiries regarding the owner’s ability to finance the project. Both parties have risks.
I think the perfect analogy would be sports. A football team, for example, practices for both the good (offense) and the bad (defense) outcomes. Scoring 35 points is not so great if the other team scores 36. Likewise, earning $20 M on a project is pointless if the costs exceed the earnings. My father, a general contractor, would refuse to bid a project if he felt he could not factor the risks into his price. It is truly better to fight another day.