The success of a capital project is often evaluated based on safety, quality, cost, and schedule. In capital projects, safety is paramount and is a non-negotiable component that outlives the project life cycle and should never be compromised. Project owners are often faced with the dilemma of navigating a tradeoff between cost, time, and quality to accomplish specific project objectives. These three factors must meet acceptable standards, but one factor can often drop down the priority list to increase the focus on another.
We have found that having a well-defined scope as early as possible not only helps with understanding project priorities but reveals ways to tackle any tradeoff issues that may arise during project execution.
Below, we discuss how a well-defined project scope addresses the time-cost-quality trade-off and how selecting the EPC project delivery method can help improve time, cost, and quality in construction.
Common Drivers Governing Time-Cost-Quality Trade-Offs in Construction
Every project is unique with driving factors and constraints that play a critical role in achieving the right balance between time, cost, and quality in construction. Some of the common drivers governing time-cost-quality trade-offs in capital projects include:
- Owner vision: It is ultimately up to the project owner to decide on a time-cost-quality trade-off in a capital project. In urgent, unplanned, or critical projects, the cost is typically less of a driving factor, and the key objective is to accomplish the project deliverables in a tight timeline. In such circumstances, the project owner can choose to enhance the schedule at an increasing cost for additional resources to keep pace with the project requirements and execution. The increase in cost is borne through the engineering, procurement, and construction phases of the project. On the other hand, when project owners are looking for the absolute cheapest option to complete the project, some optional quality offerings, such as project controls reporting or turnover book contents, may be reduced to strike the right balance between cost and schedule.
- Return on investment (ROI): ROI is a primary quantitative tool that project owners use to formalize cost and profit assessment and consider a trade-off between time-cost-quality in construction. Keeping ROI and cost-efficiency in mind, the construction schedule of a capital project can be minimized through the proper allocation of work hours to address the trade-off. For critical unplanned or emergency schedule-driven projects, where it is common for the scope to be fluid and changing, a time and materials (T&M) contract can help boost the ROI by improving time efficiency through the quick execution of frequently changing scopes and the associated financial approvals that would otherwise slow down the execution, such as under a fixed price contract.
For project owners to accomplish the time-cost-quality trade-off in capital projects, it is critical to have clear project objectives, alignment between stakeholders, and minimal change orders. A well-defined scope is the key to resolving the triple constraints of capital project management.
How a Project Scope Addresses Time-Cost-Quality Concerns
The project scope establishes a capital project’s deliverables and tasks as well as costs and timeline. Being the core of capital project management, the project scope addresses the time-cost-quality trade-off in construction by:
- Identifying driving factors for the project: A clear and complete scope helps a project owner establish the driving factors, such as cost or schedule, for the project and communicate them to the project’s key stakeholders, including contractors.
- Improving cost predictability in construction: Accurate cost estimation helps project owners make better decisions regarding the time-cost-quality trade-off. Having a complete scope definition establishes a higher accuracy of cost estimates in construction by including all of the project costs, as opposed to a lesser fraction.
- Ensuring project controls are accurate: A clear and complete scope supports a complete execution plan and schedule. If a scope is incomplete, efforts and/or quantities were likely left out, resulting in inaccurate project controls and reporting tools, such as short schedules and cost forecasts. Adding additional scope mid-project increases effort, time, and cost and results in efficiency losses.
- Minimizing change orders: An incomplete project scope often leads to frequent and sometimes significant changes to the scope, resulting in increased change orders. A clearly defined project scope can help minimize change orders and avoid cost and schedule overruns on the path to successful project delivery.
Improving Time-Cost-Quality in Construction Using the EPC Project Delivery Method
The design-build, or EPC (engineering, procurement, construction), approach allows the entire project scope to be executed by a single EPC contractor. This eliminates the risks associated with a lack of alignment between separate design and construction companies involved in the project and the resulting change management challenges. As a single team completes the project from engineering through construction, it is an efficient project delivery method to address the time-cost-quality trade-off.
Utilizing an EPC contractor and keeping as much scope of supply as possible with one entity will eliminate inefficiencies, specifically in the interphases and interfaces between engineering, procurement, and construction. Portioning out scopes of supply often results in gaps in scope, a lack of complete communication, and extended timelines. EPC contractors can perform more of the engineering, procurement, and construction activities in parallel with fewer resources than can multiple parties, resulting in reduced schedule and costs.
At H+M Industrial EPC, our in-house expertise in cost estimation allows us to better analyze the time-cost-quality trade-off and ensure successful project outcomes. With a higher level of cost and schedule certainty, we keep your project life cycle intact while meeting performance and quality standards through all stages of the project.