The invention of the internet, powerful search engines, and the cellphone have made supposed experts of almost everyone. Some doctors are actually retiring early because they are tired of arguing with patients who use the internet to self-diagnose and prescribe for themselves the drugs they see on TV. School children feel they no longer need teachers, because they can look up anything they want to know on the internet so why spend endless hours in class listening to a teacher. As a result, our society no longer believes in experts and now, with the addition of Artificial Intelligence, some people doubt the very notion of personal expertise.

Experience

Because random information is now available with ease to everyone, most people believe we’re all experts. What they fail to recognize with this vast trove of “Google” wisdom available is that expertise does not mean the simple access to information. Eexpertise comes from the Latin word, “experientia”, meaning experience, trial, testing, practice, or endeavor. Only those who acquire expertise through trial, testing, practice, or repetitive endeavor become experts. Expertise does not derive from the possession of information. Expertise derives from repetitive experience and constant practice.

Project Selection by Type 

Last week we considered the risk factor of job “size” in project selection. We concluded that there are no good or bad “size” projects, but that every construction organization has a different “capacity” to handle certain size projects. We discovered that it is the capacity (the proven ability to complete a project of a particular size on time and within budget for a profit) of a construction company that determines when a job is an appropriate size for that company to attempt.

This week we’re looking at what type of project a given contractor is most likely to complete on time and on budget for a reasonable profit. “Capacity” determines “size” and “expertise” determines “type”.

We Can Build Anything

During the typical ups and downs of the construction business cycle, the availability of new projects that are a perfect fit with your company’s experience can and will dry up from time to time. You’ve been busy building commercial buildings and hospitals for 20 years and you think maybe this water treatment plant of similar project size that’s out for bid might be something your team can handle.

• After 20 years, your experienced estimators have been using “plug and play” to estimate commercial building and hospital projects. This wastewater treatment plant is taking a little longer.
• The sprawling site layout is making it difficult to estimate the added costs of getting building supplies to the various areas on the job site.
• Sourcing exotic water treatment equipment from foreign countries is costly and unfamiliar to the estimators. They need added time to research options and settle on an accurate cost profile.
• All the equipment and connections seem like a unique challenge on this treatment plant. We need to study this further to arrive at a final estimated cost.
• Not being familiar with treatment plants, your estimators are scratching their heads over the equipment and process to handle “sludge” which they have just discovered is a byproduct of wastewater treatment. They are thinking that the liability would be enormous if we do an inadequate job of estimating and installing these unusual systems. This is not something they are confident about. They need more time to work through the problem.

This example illustrates the increased exposure when a contractor moves away from the type of work they know best and takes on a new and unfamiliar type of project. This is not to say that contractors should never diversify but merely to point out that deviating from the expertise you have spent years acquiring through repetitive practice increases your risk of losing money. Taking on a type of construction you have little experience with dramatically increases risk.

Capacity + Expertise 

• When a successful contractor accepts jobs that they have proven their capacity and expertise to complete profitably they can go “all in”. They can “bet the farm” and feel confident they will succeed.
• However, when market forces entice contractors to reach a little outside their project size comfort zone, they should only attempt project types that they have ample experience building.
• When the market pushes contractors to take on a type of work they have little experience building, they should only try it when the project is a small one relative to their normal size project.

Managing Risk

Like expert poker players, this is how successful contractors manage risk.