In real estate it’s all about making money. Generally, facility owners and developers decide to proceed with a construction project only after they have concluded that they can achieve a profit in a reasonable period of time. Developers realize a profit when they lease or sell the property at a price that exceeds the cost of the facility, including land acquisition and construction costs. Industrial plant owners seek to achieve a profit by producing final product at the lowest possible cost and selling it at an advantageous markup while remaining competitive. It follows then that the decision to proceed with a particular construction project is usually made after preparing feasibility studies that involve several considerations, among them construction costs and schedules.
So, why do some construction projects miss their target goals? Frequently, developers and owners make the mistake of relying on financial experts to compute the cost of construction when deciding whether to proceed with a project. More often than not, financial experts will simply use the common Construction Cost Reference Book as their guide. Although the Reference Book is a valuable source of information it does not provide a complete picture of construction costs or the preliminary schedule and, as a result, it can have the undesirable effect of establishing a budget that is improper for the project. In other words, by starting with the wrong conceptual foundation, the entire project is put at risk.
Mistakes are also frequently compounded by errors in judgment. Facility owners and developers are often looking to fast track their projects and do not dedicate additional time to the construction budget or the schedule to fine tune it until bids are received from contractors. Unfortunately, too little time spent on a budget can mean that the project may come in at a substantially higher price than planned. Missing the target on the budget may also mean that the project may incur additional costs to keep on schedule, or the schedule may have to be delayed to rework the design or postponed indefinitely.
There are numerous resources available to aid owners and developers in achieving a reliable budget prior to receiving bids but when it comes to scheduling there is no substitute for a construction professional with the right knowledge and background. These professionals will not only make use of historical cost data, they can also draw from their experience in the area, their knowledge of the existing labor pool and their own history with similar projects. They will also leverage their relationships and carry on discussions with the types of contractors that will be required to complete the project in order to develop a more accurate budget and a more precise schedule.
Once a budget has been approved, a team has to be formulated to manage the project. Generally the team leader should be able to start working on the project from its conception. He or she should be involved in selecting the team members, as well as budgeting, creating an initial schedule and making the necessary modifications, selecting the architect, the engineering firm and the myriad contractors who will be involved in the project.
Keeping on schedule and within budget should be the main interests of the developer or facility owner. His or her designated team leader must manage the continuity of the project from pre-design budgeting, bid evaluations and vendor selection through the construction and post construction phase. The team leader must also monitor costs and milestones, consider alternative materials in conference with the owner, architect and the appropriate contactor when necessary, evaluate delivery schedules and audit bills quickly.
Although labor unrest, permit delays, weather problems and other unanticipated events can affect the outcome of the project there are many expensive pitfalls that can be avoided. Lack of oversight and insufficient management controls can result in costly delays and missed budgetary targets. The team must be prepared to consider alternative materials when unreasonable delivery schedules threaten the schedule or undermine the budget. Frequently the project can be kept on schedule and within budget by making certain there is sufficient deployment of project managers, aggressive reporting procedures and ongoing audits to catch little problems and correct them before they become costly issues.
Being flexible enough to make carefully considered changes in schedules or materials based on emerging circumstances is absolutely essential. Construction is like a chess game – if you don’t consider a multiplicity of consequences before you make a change, you can easily lose control and ultimately lose the game. Strong project management, frequent vendor meetings and well-managed communications across all fields of expertise are like an insurance policy assuring that the numerous contractors and other specialists working on the project are utilized in the most efficient manner.
Ultimately, completing any construction project is dependent on all members of the project team working together. Like a well-made building, first you have to build a solid foundation on which the structure will rest. Then you have to build the right team and use the best materials for the job. The cement that binds everything together is the team leader. His knowledge, management and communication skills will assure that the project is completed and that it will achieve the results that developers and facility owner are looking to achieve – profit.
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