GEM Engserv Pvt. Ltd is an ISO 9001:2015 certified organization, certified by TUV India in accreditation with National Accreditation Board for Certification Bodies (NABCB).
GEM Engserv Pvt. Ltd is an ISO 9001:2015 certified organization, certified by TUV India in accreditation with National Accreditation Board for Certification Bodies (NABCB).
Over the last decade or so, the practise of engaging PMC for construction management has increased significantly in the Real Estate sector. However, the approach that many developers adopt is not often in the best interest of the project. Two key issues that plague the system are explored here.
Construction Management through a Project Management Consultant (PMC) is not merely about adding professional manpower to a project or simply outsourcing a service. It is about creating a management system around the owner’s investment—integrating time, cost, quality, contracts, risks, interfaces and stakeholders so that project objectives are achieved predictably.
The way PMCs operate differs considerably across international projects, Indian infrastructure and Indian real estate. International PMC practice is generally system & contract-driven, with defined authority, disciplined planning, formal change management, systematic quality control and strong contemporaneous records. Indian infrastructure emphasizes more on institutional and procedural governance, while Indian real estate tends to be more execution- and commercially driven, with faster and more pragmatic decision-making.
For a real estate owner appointing a PMC, however, an important distinction must be made between managing the project and making the strategic choices that determine how difficult the project will be to manage. Two important areas are improvement in this regard are explained below.
A common practice in Indian real estate is to divide the project into many relatively small packages and appoint several small contractors, often because of perceived advantages in rates, flexibility or ease of engagement. Often, the developer has a longstanding relationship with a labour contractor or a trade specialist contractor and desires to keep engaging him for all his projects. There may be sound commercial reasons for doing so. However, fragmentation creates a significant management and interface burden. Each additional contractor introduces interfaces in:
The resulting complexity is sometimes treated as a situation for the PMC to handle. This is misplaced. The choice of contracting strategy is fundamentally an owner’s decision. If the owner deliberately chooses to execute a project through numerous small contractors, the owner is also choosing a higher coordination and management risk, which he must own.
A PMC can provide the systems and resources to manage those interfaces, but it cannot make a fragmented contracting model behave like an integrated one. Nor can it create the technical, financial or organizational capability that a contractor does not possess.
This becomes particularly problematic when owners avoid appointing larger and demonstrably competent contractors primarily because of their higher quoted rates. The apparent saving in contract price can be offset by lower productivity, weak planning capability poor quality & documentation, interface disputes, greater PMC involvement, extended project duration; and greater owner management overhead.
Thus, the lowest package price is not necessarily the lowest project cost.
The PMC should therefore be involved, at least in an advisory capacity, during development of the procurement and contracting strategy. The owner should decide consciously how much of the project risk is being retained through fragmentation and how much is being transferred to capable contractors. The PMC should not be held retrospectively responsible for consequences arising from a contracting strategy in which it had no meaningful role. Further, resources required by the PMC in such a scenario will be significantly more, which the developer needs to acknowledge and pay for!
A related weakness is the expectation that the PMC will “take care of everything”, while the owner remains reluctant to take firm positions with contractors.
The PMC may be expected to achieve the schedule, enforce quality, control costs and manage contractor performance. Yet when contractors fail to perform, the owner may hesitate to issue notices, impose contractual consequences, reject inadequate work, or enforce agreed remedies because of concerns about relationships or continuity. On the other hand, the owners are often keen to enforce performance on the PMC!
This creates a fundamental contradiction in the project management system. The PMC is held accountable for contractor performance, but the owner does not empower or support the PMC to enforce that performance.
Contractors quickly recognize where the real authority lies. If the owner repeatedly overrides the PMC, accepts missed milestones without consequence, permits informal instructions or settles issues directly with contractors, the PMC’s authority becomes largely advisory. The consequences are cumulative. Schedule slippage becomes normalized, quality standards erode, commercial claims increase, accountability becomes blurred and the owner eventually loses visibility of the true cost and time position.
The answer is not an unnecessarily adversarial approach with the contractors. Good contract management is about being fair, consistent and predictable. Genuine contractor difficulties should be addressed; unjustified non-performance should have consequences. The contractor should know that contractual commitments are meaningful.
A strong PMC should bring the execution agility of Indian real estate, the process discipline of international project management, and the governance robustness of infrastructure projects.
But the owner must recognize the boundaries of the PMC’s responsibility. The PMC can:
The owner must, however, remain responsible for fundamental strategic and critical choices such as contracting strategy, contractor selection, risk allocation, commercial policy and major decisions affecting time and cost. The owner must also provide the PMC with clear authority, timely decisions and institutional backing.
The PMC’s real value lies in its ability to anticipate problems, convert information into decisions, drive corrective action and maintain control of the project. The owner should expect four things from its PMC:
Control — knowing what is happening.
Predictability — knowing what is likely to happen.
Intervention — acting before problems become expensive.
Transparency — knowing where responsibility and risk actually lie.
But there is an equally important responsibility on the owner:
Owners should not outsource accountability for decisions that only the owner can make.
The most effective owner-PMC relationship is therefore not one in which the PMC is expected to “manage everything”. It is one in which the owner makes sound strategic choices, the PMC manages within clearly defined authority, and contractors are held accountable for the performance they have committed to deliver. In this regard, International PMC ecosystem appears to be doing the right things, but the system in Indian Real Estate has lot of catching up to do.