MMP Quantity Surveyors

Rapid assessment of distressed projects can limit losses

As has happened in many other countries at many other times, Ireland has recently gone through the process of a burst property bubble. It is not uncommon for this type of event to occur particularly where credit flows have grown dramatically. One result of the burst bubble has been a significant increase in distressed projects. Sudden lack of availability of credit has meant that many projects have slowed down causing them to fall outside of their projected budgets. Many developers of residential and commercial buildings may have relied on the profits of finished projects to pay for the continuation of subsequent constructions. The property price adjustment that resulted from the bursting of the property bubble made this process very difficult and in some cases impossible.

Bringing distressed projects back into line with original or more feasible budget and time limitations requires particularly experienced and knowledgeable project management experts. By providing immediate and decisive feedback to the client, experts can help determine the feasibility of bringing the project through to completion. With adequate knowledge as to the potential of the site, clients can make an informed decision to either go ahead with the distressed project or to liquidate it. The sooner this decision can be made the lower the potential for losses being incurred.

Getting expert assessment of a distressed project at the earliest point possible results in the best possible outcome for the parties involved, however it can be difficult to determine when exactly a project has become distressed. Often a strong desire to see the project finished can mean that by the time the difficulty of the situation has been recognised it is too late.

Transparency in the process of the project’s management is one of the most effective means of determining any change in the status of a project at the earliest point possible. Clarity in communication between all parties involved is similarly important. Uncertainty and lack of information pose particular danger to a construction project.

Signs that a project may be in danger of becoming distressed can include irregular or unexpected changes in contractor claims, low levels of activity on site at points in the project when such activity should be high and cash flow problems that may be indicated by high manger turn over or contractors going unpaid.