Due Diligence. Determining levels of risk mitigation in the wake of recent failures announced with the Hurricane Sandy New Jersey Restoration Project.

Lack of proper due diligence.  This was sited on several news agencies as the cause for the failure of the New Jersey Restoration Program implemented in the wake of hurricane Sandy.  But what is "proper due diligence"?  What is the minimum that should be completed, how far should you go, and how far can it legally go?

SDD (Standard Due Diligence), EDD (Enhanced Due Diligence), KYC (Know Your Customer) and KYCC (Know Your Customers' Customer), are now very commonplace acronyms with extensive processes behind a simple label. What is also commonplace is the struggle to determine which to complete and how far to take them.  Due diligence is a process typically conducted by a team of analysts in Compliance, Risk or a combination of both, or at least should be. In the instance of the NJ restoration project there is a good chance that the level and extent of due diligence was determined by a project management team .  In other instances it may have been a process improvement team, but either way entrusted to a project manager who gathers the information from others to complete a general risk assessment to determine the level of due diligence needed.

This is where the problem starts.  What is due diligence?  Technically due diligence is anything obtained beyond basic information, name/business name address, phone number, tax id number, license copy or whatever information is considered standard.  According to reports the screening of contractors included verification that they were bonded, insured, and registered. Standard for contractors so it makes perfect sense.  Once the basic information is obtained the questioning should turn towards; How important is this project? what work will they be conducting, How much needs to be know about the contractors and/or their sub contractors? How much can we legally obtain?

The Project manager in this instance either should have been an experienced contractor or engineer, and should have included experts  on each of the tasks that needed to be conducted for example, a plumber, HVAC contractor, Electrician Structural carpenter.  Specific area experts are absolutely necessary to determining the level of  risk mitigation and in turn due diligence needed without exceeding reasonable limits.

The First question of importance is what should feed the the additional line of questioning, and should be asked of every task within the project as well. The answer to the importance questions with provide a risk rating. This will determine the level of due diligence that is deemed necessary in order to facilitate a successful project in the least amount of time, with the highest quality and as little risk as possible.  If you know Six Sigma methodology this should sound very familiar.

When conducting personal coaching the first thing that I have people ask themselves is; "Have I done everything necessary, possible and reasonable to achieve my goal.  This question needs to be asked when determining due diligence as well, the goal being knowing as much as is necessary, relevant and can be reasonably obtained in order to eliminate risk.

The conclusion will determine if worker background checks are conducted, what type of background checks, Peer and customer references investigation, ongoing and post work follow-up. I read in the report that a contractor had backed out at some point and yet was still accepting contracts months after continued due diligence could have easily prevented this.

According to the information I have received it very much appears as if the PM team may not have thought that this project was important enough to necessitate further due diligence beyond basic information, did not include task experts or that they did not properly allocate resources in order to conduct it initially, and on an ongoing basis. What many fail to realize is that audit and/or quality assurance is also a part of due diligence to ensure continuity with risk mitigation.  Work should have been inspected and reviewed for quality immediately after completion.

when failures, such as this one occur it is easy to pinpoint the direct deficiency that caused the failure, however that deficiency can most likely be traced back to the Project Manager.  This was a government project and unfortunately the government does not have the best record for putting effective or qualified people in the proper positions.