By Randy Thompson
Controlling project costs takes experience and initiative. Over my 25 years in project management I have developed tools, processes, and intricacies needed to control costs. Below are four strategies to follow to ensure the best and most aggressive pricing.
- Design to Budget – Architects and designers often provide drawings/plans that exceed the construction budget, which results in a change order for redesign and time lost to “value engineering.” For this reason, as part of designer RFPs, I include language requiring the design team to rework any drawings that are over budget at no additional cost to the client.
- Watch the Schedule – A general contractor’s pricing includes “general conditions,” which covers fees for jobsite staff, management of materials, oversight of temporary site conditions, etc. Elements of general conditions that relate to labor (project managers, site supervisors, pre-construction services, estimators, etc.) include the costs of salaries and insurance for these key people, so the longer a project runs, the more general conditions you pay. We avoid this by making sure the proposed schedule is attainable and reasonable for the size and scope of the project and that potential delays are avoided.
- Embrace Building Information Modeling (“BIM”) – Building Information Modeling is a virtual, 3-D drawing of a building that can anticipate conflicts between plumbing chases, risers, duct work, electrical closets, vertical and horizontal penetrations, etc. Employing BIM allows problems with constructability to be detected, diagnosed, and fixed before construction starts, avoiding field-generated change orders.
- Beware the Contingency Fee – Subcontractors (painters, framers, carpet guys, cleaners, plumbers, electricians, iron workers, etc.) often include a contingency fee (10% is pretty common) to cover small mistakes. However, if the total cost of your entire pool of subcontractors is $30 million and each trade includes a hidden 10% fee, then your project is actually expected to cost $27 million. The contingency fees collectively add an additional $3 million to the project cost without a way to recoup the money if it isn’t needed. Therefore, I require contractors to submit pricing void of contingency fee and instead add a line item to the master budget called “Contingency.” This keeps the project manager in control of these oftentimes hidden extra costs.
The best way to ensure you are getting the best pricing and managing the budget correctly is to enlist the help of a seasoned project manager. Cushman & Wakefield has helped hundreds of companies complete successful construction projects. Our team works on everything from Build-to-Suits to Tenant Improvements. To learn more about Cushman & Wakefield’s Project & Development Services, please visit http://www.cushmanwakefield.com/en/services/project-management/
Randy Thompson is the Senior Managing Director of Cushman & Wakefield’s Build-to-Suit Advisory Group. Since joining C&W in 2000, Mr. Thompson has worked with C&W’s clients in such varied fields as healthcare, legal, manufacturing, high-tech, hospitality, professional services, engineering, energy, and financial services. He has managed and overseen over 13 MSF of office, industrial, and special use projects. In addition, he is an active member of C&W’s Sustainability Committee.