There has been an increased demand in the last few years by owner and financing firms for independent third party cost and schedule reviews. We have recently completed a number of these independent reviews on behalf of financing organizations. It has been a great experience because we are allowed take a deep dive into understanding the mechanics of all sorts of projects.
Third party reviews have grown in popularity for the purposes of assurance; either for the lenders, investors, or senior management. We believe the review process will continue to increase in the coming years, due to higher cost scrutiny.
While all projects start off with good intentions and what the actors believe to be solid plans, management often makes the mistake of moving into execution without one or even two independent third party reviews. Would you trust the first doctor who said you needed extensive brain surgery and that he was going to perform the operation?
If an independent third party review is not used at each stage gate of a project’s development, or even before the plan moves into execution, independent third party reviews are often instigated by one of the following events:
- the project has gotten into trouble, needs more money, or is behind schedule
- inaccurate progress monitoring and reporting (more on this in another post)
- trust has broken down between the lenders, the executive team, and the project management company
- the owner needs more money from a well-run project, and wants to know if they can cut corners
An unfortunate truth of third party reviews is that, even after a review has been completed, people either don’t act on the results to mitigate risk and they don’t ask for a second or third opinion. Resource owner management typically do not invite cost and schedule reviews on their projects because a negative report could be used against them.
Reviewers gain an extraordinary amount of experience in a short period of time. If we consider the average life cycle of a project to be from 2 – 10 years and a project professional works for 20 years, then we can assume that project professionals see between 4 and 7 projects in their career. A professional independent third party reviewer generally sees 2 projects every 4-6 weeks, if times are busy. So in 6 months, a project reviewer can see data on the same number of projects that execution professionals would see in their career.
A level of trust has left the industry and given the cost and schedule blowouts in the last five years, perhaps this new caution is warranted. Confidence may not return any time soon. Until that point, we should expect that third party reviews will be a greater part of project development, execution, and operation.
Co-written with Matthew Brook