Security systems integrators are learning something that their counterparts in information technology and electrical contracting have known for some time â€” namely, the value that disciplined project management can bring to a business.
“With the technology getting easier, the pressure is more and more on managing delivery and making money on projects,” notes Nadim Sawaya, president of Enterprise Performance Consulting, Pittsburgh, Calif., a firm that offers training and consulting on project management tailored for the security industry.
When Sawaya consults with a systems integrator, part of the analysis he does involves process mapping to determine where a company may be losing money. He has found that the net margin on a job, on average, ends up at 10 percent less than the original estimate. If a company can correct that by implementing project management best practices, Sawaya says, “The financial impact is huge â€” they can double or triple their net present value.”
To ensure success, systems integrators must adopt a project management culture, Sawaya says. They need to provide the infrastructure, including written procedures and operations manuals, to allow a project manager to effectively manage.
A Project Managerâ€™s ResponsibilityProject managers typically are responsible for overseeing an installation from the time of sale until final delivery to the customer, and for ensuring that cost and delivery targets are realistic and that they are met. To achieve that, project managers must be effective communicators who can convey critical information to engineers, installers, and salespeople, as well as key stakeholders on the client side. Many project managers handle several projects in various states of completion at a time, which means that organization and documentation is critical.
Entrance Controls of Vancouver, Wash., is one company that contracted with Enterprise Performance Consulting to help it implement a project management program. The result, Entrance Controls president David Pelkey explains, is that “We have an operations platform, an operations manual and it’s all mapped to software that runs the company and that everyone uses.”
By implementing a formal project management program, Pelkey says, Entrance Controls was able to increase the amount of technician time the company actually bills from 75 percent to over 90 percent â€” a result Pelkey attributes to the fact that in the past, technicians had to do their own project management.
Entrance Controls also put project managers through a formal training program put on by Enterprise Performance Consulting and as a result, Pelkey says, “We have received a lot of compliments and comments from customers about the responsiveness and professionalism of our project managers.”
Another benefit, he says, is that, “Other contractors we work for recognize that we’re accomplished at project management, which protects us during construction projects. Before they were running circles around us.”
Training & CertificationsSeveral different organizations, including the Security Industry Association (SIA) and the National Systems Contractors Association, offer certification programs in project management. Increasingly, systems integrators also are hiring or training people to be project management professionals (PMPs), a certification program of the Project Management Institute that has a heavy emphasis on information technology best practices.
Tech Systems of Duluth, Ga.,SDM’s inaugural Systems Integrator of the Year in 2004, is one security systems integrator that has PMP-certified project managers on staff, along with employees who have become certified security project managers (CSPMs) through a SIA program that is tailored for the security industry. “With convergence, you really have to adopt both programs,” comments Wayne Smith, vice president of network services for Tech Systems.
PMP training emphasizes testing and authorization, which is especially critical in an IT environment, Smith says. “IT has been using this methodology for years,” he explains. “Sharing this methodology gives us credibility when dealing with projects where IT is heavily involved.”
By following practices learned as part of the PMP training, Smith says, “You get it right the first time. Your deliverables are very specific and you have to have it laid out so IT knows exactly when and where you want to implement software or a firewall. The customer gets exactly what they expect the first time.”
Andy Chambers, director of regional services for Tech Systems, leads several project management teams, including 13 employees who have received CSPM certification. “When you see a problem, it teaches you what questions you need to ask and it emphasizes how project managers should document what they do on a daily basis,” Chambers says.
Chambers also likes the fact that the CSPM program requires certificate recipients to get continuing education units after certification. “In our industry there are so many changes, it’s important to keep up-to-date with them and maintain professionalism,” Chambers comments.
In the following short segments, we explore some of the best practices in project management today and learn how they have helped systems integrators improve the quality of their work and maximize profitability.
1. Get Everything Straight up FrontEntrance Controls has a fairly formal process for what president David Pelkey calls “turnover” â€” where salespeople and sales engineering turn a project over to the company’s operations staff, which includes the project manager. As part of the process, all project parameters are discussed and a strategy is created, Pelkey says.
“Operations takes the information and has up to two weeks to re-estimate it,” Pelkey explains. Before the two weeks are up, Pelkey says, operations determines whether the job can be done at the proposed margin or not, and if not, an explanation is provided.
The commission for the salespeople is driven off the accepted gross margin, which may not match the margin at which the job was sold. As a result, Pelkey explains, “The project gets sold pretty accurately.”
This approach also provides a strong motivator for the operations staff by providing a clear margin goal to which operations has agreed. A quarterly monetary incentive is also involved. “If they did 10 jobs that came in 10 to 15 percent under their estimate as a group, everyone who touched the job gets a piece of that reward based on individual salaries and how much time they spent on the job,” Pelkey relates.
Albuquerque, N.M.-based systems integrator SCI Inc. also relies on project managers to help ensure that a project meets its margin goals, but the company approaches that goal a bit differently. SCI co-owner Daved Levine notes that the scope of work, in combination with the project detail and design material package, becomes the P&L (as in “profit and loss”) guideline for each project.
“Project managers can be creative about how to accomplish that,” Levine comments. “We love to see artistic installations where the cable is brought in and managed beautifully or conduit that could be a sculpture.”
Although meeting schedules is important, Levine says, “We reinforce quality of work over speed. No one is ever pressured to do things fast, just to do it right and do it well. If something will take a bit more time, but it’s within the company allowance, the project manager is allowed to make that decision.”
He adds, however, that “There is a cut-off point and beyond a certain point, the project manager must involve someone else.”
2. Study Your ContractsOften a systems integrator is a subcontractor to another contractor or general contractor. In those situations, it’s particularly important to review contracts carefully and to know what to look for, advises Pat Van Haren, president of Grand Rapids, Mich.-based systems integrator SecurAlarm.
One general contractor worded a document so that SecurAlarm would have been required to do warranty work for a year, regardless of the cause. “If another contractor hammered our equipment, we would have had to replace it,” Van Haren recalls.
SecurAlarm project managers make sure that indemnification clauses are worded so that the company will only be involved in a lawsuit if it is at fault. “That way, if there’s a suit on the job, we’re not dragged in unless we had a part in it,” Van Haren explains.
“Liability, indemnity and warranty are key things,” Van Haren says. “We’re not afraid to negotiate a different clause.”
SecurAlarm often borrows new wording from sample contracts published by the American Institute of Architects. That organization publishes an invaluable resource book, Van Haren says. SecurAlarm also belongs to the American Subcontractors Association and has found that to be a helpful affiliation.
3. The Kick-off MeetingThe kickoff meeting with the client is a critical event. The project manager and key members of the team that will work on the job should attend the meeting, along with key personnel on the client side, Sawaya advises. The goal of that meeting, he says, is to “set expectations and designate the scope of work.”
The project manager also should ensure that the company has an approved engineering submittal from the customer before doing any work on the project, Sawaya advises.
RFI Communications & Security Systems, a San Jose, Calif.-based systems integrator, has found kick-off meetings with clients to be extremely beneficial in managing client expectations, which in high-tech Silicon Valley sometimes tend to be unrealistic.
“We used to have great meetings internally but then we found that the client may have had a different perspective,” comments Brad Wilson, RFI president.
Even when the client is a general contractor, it’s critical to have a kick-off meeting prior to starting a project, notes Bob McMenimon, founder of Canton, Mass.–based integrator MAC Systems â€” and if subcontractors are involved, they should also be present.
4. Donâ€™t Overlook Stored MaterialsIn ordering materials for a job, systems integrators face a delicate balancing act. To get volume discounts, they may need to place a large order. But they also need to recognize the hidden costs of ordering material too early – such as storage costs, which should also include the cost of insurance.
“Make sure you know how to bill for stored materials,” advises Van Haren, who notes that systems integrators may be able to bill general contractors or end-user clients for storage. He cautions, however, that “If you only get 90 cents on the dollar for stored material, you’d better time your purchases correctly.”
Another important timing issue pertains to warranties. The clock on a warranty period starts ticking when equipment is purchased â€” and if the equipment is not installed right away, it shortens the coverage period once the equipment is installed.
5. Document all changesA key benefit of a formal project management program is to put a systems integrator into a stronger position when it encounters issues created by other contractors that can impact the integrator’s ability to meet its project goals.
“One of the key things I tell project managers is even though we may be further down on the food chain, we’re just as entitled to relief from schedule impact and cost impact,” comments Doug Whidby, vice president of operations for Convergint Technologies, Schaumburg, Ill.,SDM’s 2007 Systems Integrator of the Year. “Documentation on a project is crucial and needs to be timely and detailed.”
The two most critical documents involved in working with other contractors are the request for information (RFI) and the change order request (COR), Whidby says. If, for example, the project manager were to hear that an end-user client organization was planning to add a door to a new construction project, it would be the project manager’s responsibility to issue an RFI asking for confirmation that a door was being added. In the RFI, the project manager also would ask if the door should be added to his or her scope of work.
RFIs and CORs should be issued to whomever the systems integrator is contracted with, which could be a general contractor or subcontractor. That entity may not have the answer to the question, but it is the responsibility of that entity to determine the answer by issuing an RFI to its client, who, if necessary, issues an RFI to its client until the decision-maker is reached.
“We might generate several RFIs or CORs in the course of a large project,” Whidby relates. “The project manager should maintain a log of each request, when it was sent, when it came back and if it was approved or disapproved.”
RFIs or CORs also should be issued when a systems integrator is unable to perform work on schedule because of something another contractor did â€” such as failing to install a door on time.
“On several large projects, a particular piece of documentation has saved us in the $20,000 to $50,000 range,” Whidby says. “Without documentation, there would be very little chance of securing that money because inherently we’re a lower-tier contractor.”
6. CloseoutSystems integrators also can benefit from instituting formal procedures for closing out a job.
Red Hawk, a nationwide systems integrator headquartered in Greenwood Village, Colo., does a closing audit on a job in the month that it was completed. “We don’t turn it in for billing until we make sure it’s correct,” comments Mike Gordon, project manager for Red Hawk. “If we used subcontractors, we make sure we got the bills. If there were add-ons, we make sure they were included and we make sure that all labor has hit the job.”
At that time, the company also looks for lessons learned that it can apply to future jobs. After doing a lot of work for local schools, for example, Red Hawk has found that halls can become crowded between classes, temporarily preventing technicians from working. The company now factors in extra time in planning such jobs while school is in session.
Ultimately, a systems integrator has to learn to expect some surprises, Gordon says.
When bidding such jobs, Red Hawk could factor in extra costs to cover such unexpected delays. But, Gordon notes, “We want to get the job and if we factored in everything that could go wrong, we probably wouldn’t do a lot of jobs. We try our best to factor in the ‘what ifs’ but sometimes you have to figure things even out over a number of jobs and often they do.”
Convergint Technologies’ project managers also follow a rather formal process for closing out a job. “When operations turns a project over to the service group, they go out and do a job walk,” Whidby notes. The project manager and service manager walk through the site and review a hand-over document.
Having a formal closeout process also can ensure that the project manager has a clean break with the customer and can provide a clear demarcation for the beginning of the warranty period, Whidby explains.