In the past three years, the entire construction industry has learned a lot about managing projects through adverse situations with the pandemic-related shutdowns, a workforce shortage, supply chain challenges, and inflation, among others.
Many owners are now often working on projects they planned pre-pandemic, and those projects are struggling to stay on schedule and budget. With a few strategic building blocks in place, building owners can take control and build a foundation for project success now and in the future.
In ensuring a successful project it’s critical to start by outlining an accurate project scope. When setting up a scope for new construction or a renovation, it’s important to make sure there is a realistic schedule and a budget that’s reflective of the current market. While this sounds rudimentary, it’s become increasingly complicated in today’s marketplace to get that foundational information in place.
Budgeting
One of the biggest challenges with project budgets is setting them appropriately for the current marketplace. Coming out of such trying times, many building owners are approaching projects somewhat conservatively, focusing more on efficiency, rather than a big change in operations. Owners are paying close attention to supply chains, re-evaluating relationships with all partners and focusing on continuing relationships with trusted partners to navigate the uncertainty that comes with supply chain and workforce challenges.
In general, building an accurate scope for a project is getting more complex with so much disruption in the industry. Often a bid can’t be taken at face value and needs further analysis to understanding it. When comparing bids to original budgets, it’s important to understand why a bid may be significantly higher or lower than originally anticipated. If a contractor is self-performing many of the scopes, it will have a significant impact on the bid. They get their markup as the general contractor, and then the markup on the work they are self-performing. When a contractor is self-performing, the markup on the work will likely be less than if there was a subcontractor involved, so that lower cost makes sense.
If you see a large discrepancy in bids, it may be related to the thoroughness of a bid. It’s important to not just compare the bottom-line cost of a bid, but really look at what went into the scope of that bid. Taking the time to look more closely at these discrepancies across bids can often reveal some insights that are more than just a price difference.
Whether it’s labor or material costs, looking at benchmarks from past projects and involving someone independent to confirm those costs can help make a budget as accurate as possible.
As part of that planning, it’s important to look at the complexity of project as that can cause other a cascading effect of budgeting issues. Hotel renovations can be a good example of this. Let’s say a hotel did two similar renovation projects updating finishes like paint, carpet and fixtures seven to ten years apart.
Although they may be very similar renovations, the most recent renovation will have significantly increased costs resulting from a variety of factors, like maybe the building access had become more complicated and more time is needed to move materials in and out of the building, using more labor significantly increases cost. On the same note, these repetition projects also need to consider the aging parts of a building. For example, putting new finishes in a hotel may not be the most cost-effective projects if the water lines are aging and in poor condition and need to be replaced.
Scheduling
Outlining realistic schedules is another key component to setting a project up for success. There are a couple of fundamental considerations for building schedules starting with the design phase. We know it’s critical to build in ample time not only for the designers, but for the review these designs as well. Don’t underestimate the time that building owners need for review, interpretation of what people like and don’t like, and rounds of design revisions. It’s better to be generous with this time as it serves as the foundation for the remainder of the schedule.
Looking at the permitting phase, it’s clear that the post-pandemic permitting process is entirely different than it was three years ago. Permitting offices across the country, like so many other businesses, were shut down and have struggled to get staffing levels back to pre-pandemic numbers, resulting in much longer timeframes for permitting.
In the building phase, there are still a number of delays and uncertainty with certain supply chain which need to be addressed when building a schedule. Companies won’t be able to use their old, just-in-time schedules of the past anymore. That way of working was already stressed, and now, its weaknesses have been exposed and can be disastrous for a project. For example, in the first half of 2022, new transformers and similar items which typically take 16 weeks to order, suddenly were taking 52 weeks to get by the third quarter. While the timeline is getting better, things still aren’t back to typical timelines. In the case of a transformer, progress on an entire project could be impacted without this critical infrastructure piece so there are serious implications to a schedule if it isn’t there on time. Ordering components and materials early and even stockpiling critical materials can help projects stay on schedule. It is becoming more common for projects to have storage space near job sites set up specifically for this purpose.
One final building block when setting up a new project is to focus on building relationships and awareness for a project. It’s important that there’s a high level of enthusiasm on the project management side to get contractors interested and excited about being part of the project. By working with contractors ahead of time and sharing the upcoming timelines, establishing a clear understanding about the project and ensuring they know when it’s coming out to bid so they have the resources in place to work on it. These are all critical things to ensure the success of your project by driving broad interest from multiple contractors. By avoiding a situation where there’s only get a single bid, a competitive bidding process will keep the prices down.
With a little extra time and effort spent upfront developing the scope of work and taking a critical eye to budgets and schedules, a project can be set up to successfully meet its goals and building owners will have built a foundation for project success now and in the future.
