From a contractor's perspective...
By Jim Mellor, LEED AP
Director of Business Development
Starting with an inadequate/inaccurate construction budget (sure looks good on paper).
Because responsible budgeting can be a tricky proposition, we find the best way to ensure that our owners get what they want both in programming and cost is for the owner, design, and contractor to work together from the beginning to establish realistic cost expectations regarding labor, materials, lead times, schedule, and other cost considerations. We frequently see owners come to us with a good idea of what they want to build, but their budgets are based upon flawed data: maybe the numbers came from a similar project, but it was out of the market; maybe they came from a reputable design professional, but design teams are rarely the “last word” on current market conditions; and of course, if the budget numbers are derived from competing contractors working from incomplete drawings, chances are they’re definitely low.
Not accounting for all actual development costs
We have seen numerous horror stories of owners entering projects without fully developed proformas. The mistakes and omissions that accompany these efforts are as varied as you can imagine and include inaccurate tap fees (wide disparities among municipalities), not fully understanding soil and environmental conditions, and getting surprised by regulations unique to each authority having jurisdiction (AHJ). These surprises can have significant impacts on schedule and budget.
Competitively "bidding" incomplete plans expecting a complete and final budget
“When owners ask multiple contractors to compete for a job by providing pricing on incomplete drawings, they set up a game of ‘liars poker’ that produces low-ball pricing,” says Jim Pinkard. “Good, accurate pricing requires that CM/GCs take time to work with the owner and full design team to accurately understand the design intent and ultimately make sound decisions to fill in gaps that are inherent with incomplete drawings. These pricing competitions typically activate the “when in doubt, leave it out” pricing mindset that influences preconstruction teams to err on the low side of their options instead of focusing on real-world variables that produce the most accurate bottom line. And almost without exception, the contractor that strives to provide the most complete and accurate pricing is never selected.
Underestimate total development time, especially in a scarcity environment
Speed-to-market and the need for developing a revenue stream NOW can blind a developer to project timeline realities. As highlighted in item 2, soil reports, fully developed drawings, comprehensive existing conditions investigations, and getting familiar with AHJ requirements are project fundamentals that cannot be skipped. Materials such as steel or anything with a computer chip are now taking upwards of a year to procure and deliver. Ignoring these fundamentals can ultimately force a developer to “pick their poison” in later project phases, having to decide whether to compromise budget, schedule, or quality.
Lack of trust in team partners/Keeping the actual budget hidden
Your ability to make intelligent informed decisions is directly dependent upon the quality of the advice you receive. Good advice is not possible without full disclosure to your advisors. In a recent study of 300 construction projects conducted by the University of Colorado, teams with high-trust factors are the number one indicators that a project will be successful.
Not doing a complete environmental audit/survey
Unforeseen conditions are the biggest risk to any project. Without responsible due diligence during design, your project could potentially experience catastrophic delays and budget overruns due to unforeseen conditions. Take the time; spend the money. Learn what you’ve got and make informed decisions on how to deal with it.
Not carrying an adequate Owner's contingency for design and construction risks
No matter how well you plan, every construction project will have its share of surprises. A great project team will minimize the effects of these surprises, but regardless of the surprise, and regardless of the skill of the project team, the fix will cost money. The cost is sometimes borne by the architect or contractor, but when it’s your turn to “step up to the plate” financially, you will want to have your contingency to cover your responsibilities.
Hiring a company’s "A" team but allowing them to "bait & switch" to a less experienced team
The corporate resume of your chosen company is very important, but it’s the experience of the team members that will determine your project’s success. And the difference between an “A-Team” and a “B (or C or D) Team” is huge. Stipulate during the selection process that a company’s proposed team must be the team that stays with the project.
Not prioritizing the value of “hidden” services
The bottom line matters, but if your bottom line is your only metric, then your beautiful low price can quickly turn into a trap fraught with delays and long-term compromises that negate your early savings. While contractors are building the visible “bricks and sticks” of your project, architects and engineers deal with many of the critical “hidden” aspects of your project such as soils conditions, structural/foundations, and building systems including heating, ventilation, and air conditioning. Avoid the temptation to save money by compromising on these “hidden” systems and conditions. Many an owner has had long-term issues getting HVAC systems to cool properly, and bad soils can wreck your foundation.
Not managing the preconstruction phase of the schedule
Delays during the development phase DO translate into delays in your completion date. While our role is to always find the most efficient schedule possible, a 12-month schedule is a 12-month schedule. But with the current acute labor shortage, contractors are extremely limited in their abilities to accelerate construction schedules by supplementing Jobsite labor.
So what is the bottom line?
Understand that a cheap first-price sets up your project for failure; choose a team that will work in your best interests; get them on board early; plan well, and continually work to create a culture of trust and teamwork.
And above all, with all the proper groundwork laid, enjoy your construction experience.
Is your project in trouble? We can help! Contact us!
