Controlling Capital Costs

smaller smaller Tempest Logo - Marbelized -2008My dad was “blogging” even before there were any blogs! I have many of his articles and white papers dating back into the 1980’s, that I think need to be shared. I will be adding some of his articles to Oh, By The Way…  because the info is still very good. Here is a look at another.

Controlling Capital Costs Prior To Construction

Reliable cost estimating methods exist to keep budgets in line with the expected bid amounts. These methods are available for use with the decision and design process of any project. The methodology is to perform construction cost estimating with historical costs, professional estimators, and organization and procedures. By adhering to this methodology, costs can be controlled from project inception.

Decisions to proceed with a project by facility owners and developers, are made with the intention of attaining a profit. With a developer, the profit is attained by leasing or selling the property at a rate that will exceed the cost of the facility. With an industrial plant owner, profit is attained by keeping production of the final product at the lowest possible cost. The decision to proceed with a project is usually made after preparing feasibility studies that involve several considerations, among them being construction costs.

All too often, facility owners and developers rely upon feasibility estimates prepared by “number crunchers” using common construction cost reference books. This can have the undesirable effect of establishing a budget that is improper for the project.

In addition, if facility owners and developers do not dedicate any further time to the construction budget until bids are received from contractors, it then becomes a case of too little, too late. Bids may come in substantially higher or significantly lower than budgeted.

If the result of this is a substantially high variance from the budget, it can cause the facility to incur additional costs to keep on schedule, the schedule to slip due to reworking the design, or the project to be postponed indefinitely. If there is a significantly low variance from the budget, it can cause the schedule to slip in order to bring the design up to budget or an unrelated project to have gone unfunded due to a priority in the allocation of funds. Both of the above results are detrimental to the facility owner and developer.

There are resources available to aid the owners and developers in their quest for attaining reliable budgets prior to receiving bids. These include the use of historical cost data and professional estimators along with a method of organization and procedures to follow for estimating. While the use of these resources will appreciably reduce the exposure to budget variances, the variances will not be eliminated entirely. However, the facility owner and developer will be better prepared to analyze the cost discrepancies that might occur. Article Continued.

My Summer Project Continues

As I mentioned in a previous blog, my summer project is building a deck with my family. The project includes the partial demolition of the existing deck, fixing what needs to be fixed, and replacing decking and railings. I am taking the time to teaching my kids how to plan and sequence work, work with tools, adapt and change plans when the unforeseen conditions appear, and what a good day’s work feels like.

We are finishing up on the decking now and have had our fair share of unforeseen conditions appear. From 2 pressure treated joist being rotten to finding that there was no header joist only fascia. After fixing those items, we were able to start working on the re-decking in earnest. My wife and I would break the kids up into teams and rotate them so they could learn what each of us was doing. This also allowed us to get more done. (It also helped to break up the kids who were currently fighting.)

Oh, By The Way… Another thing we are doing is paying our kids for helping out on the deck. They have to keep track of their hours and they will get paid once the job is done. Five bucks an hour stops a lot of the complaining about working all weekend. Not only has the complaining gone down, but they are working even harder now!

flipflops

Contract Schedule Of Values

smaller smaller Tempest Logo - Marbelized -2008My dad was “blogging” even before there were any blogs! I have many of his articles and white papers dating back into the 1980’s, that I think need to be shared. I will be adding some of his articles to Oh, By The Way…  because the info is still very good. Here is a look at the first one.

 

Fallacy of the Contract Schedule of Values

INTRODUCTION

One of the most common formats for requesting progress payments is the use of a form that lists the activities and their values. These Schedule of Values typically contain provisions for the description of the work, value of the completed work, value of materials stored and the value of the balance to finish the work. Development of these forms and format is easy when using any of the common commercial spreadsheet programs. If this is not desirable, the American Institute of Architects has a pre-printed Application and Certificate of Payment (AIA Documents G702 & G703).

However, the commonly developed forms and the AIA documents are missing key components for the Owner and/or the Owner’s Representative to reliably determine the actual status and values of the completed and remaining work. There may or may not be supporting documentation containing the information required to make the assessment. Due to this, the process of determining the actual and remaining values becomes a highly subjective process.

What is needed is a method that is objective, reliable and easy to verify. This method must also be easy to set up and use; otherwise it may never be implemented. There is a better way to manage the overall project status and to provide for a less contentious method of determining the progress status and contractor “earned values”. This can be done with a simple set of modifications to currently used contractor progress payment request forms.

Article Continued

 

My Summer Project Becomes A Lesson On Sexism In Construction

My summer project is building a deck with my family. The project includes the partial demolition of the existing deck, fixing what needs to be fixed, and replacing decking and railings. I am taking the time to teaching my kids how to plan and sequence work, work with tools, adapt and change plans when the unforeseen conditions appear, and what a good day’s work feels like.

I remember working on the many projects that my parents would do over the summer and I learned early on how to do many of the skills that I am trying to teach my kids. One of the things that my kids are learning that I didn’t is the sexism that you will find in the hardware stores or supply houses that we have visited!

My wife has been doing a lot of the material purchasing for the project and since its summer break, she has brought the kids along. On almost every trip that she has made without me, my wife has encountered a worker that will talk down to her. The workers just assume she does not know what she is talking, about even though she does. When my kids see this treatment, it affects the way they see the project and shapes their future. I don’t want them to make the decision to not go into construction because of how a worker treated their mom.

Oh, By The Way… My wife did the words for the picture! So please no angry letters calling for my head!

vintage manw words

Good News For The Construction Industry

I saw this in the Wall Street Journal and thought I should share such good news!

Design Index Notches a Big Gain

Demand for architectural design work is picking up, an indication construction spending should advance at a healthy pace in the months ahead, according to the American Institute of Architects. The Architecture Billings Index, based on a monthly AIA survey, jumped to 55.7 in June, up sharply from 51.9 in May. The June number was the largest since July 2007, when the index stood at 57.6. A score above 50 indicates an increase in billings. The AIA said June’s large increase reflects strong demand for work on new commercial and institutional projects, including schools, health-care facilities and public-safety buildings.

Construction Renovation At Its Best

I love a good story about an old building finding new life, and this happens to be one of my family’s favorite places to visit in St. Louis.

This 10-Story Factory Has Been Transformed Into An Incredible Adult Playground

In the wake of mass movement of jobs overseas are countless empty factories, but the City Museum of St. Louis had a pretty awesome idea. They wanted to transform an abandoned 10 story shoe factory into a fun playground for adults. Kids are welcome too! Check out what they’ve done with the place.

Oh, by the way… This blurb was featured on Higher Perspective. However, I added a different video from the City Museum Site, as I thought it showed more of the old factory’s new life.

Conceptual Estimating vs Conventional Estimating

Copyright (c) 123RF Stock Photos

Copyright (c) 123RF Stock Photos

In the estimating profession, there are a few different types of estimates. The conventional estimate is one that typically has a set of drawings and specifications for a project and bases the estimate on the information presented. A conceptual estimate is an estimate that has very little information and is based upon the information provided and also the assumptions that are made.

Oh, By The Way… Here is a link to a Sample Conceptual Estimate and a link to a Sample Conventional Estimate.

 

Congratulations Top Contractors

Every year, the Engineering News-Record (ENR) publishes a list of top companies in their respective fields. As I was checking out the Top 400 Contractors list, I got the great idea of sending out something to say “Congratulations!” to all of our clients who made the list. (I’m the boss. I have great ideas!) So, I gave the ENR to marketing and said, “Hey, can you send it out next week?” I then got another cup of coffee and headed back to my desk to see if any more great ideas popped into my head.

good job sMarketing contacted me the next day with a question. Was I aware of how many of our clients are actually on the list? Well, I had read the list and given it some thought. But, it’s not like I sat there and kept a tally as I read! Well, to make a long story unbearable, the list had hit over 200 clients! I guess a hand written congratulations card to each and every one was out! We sent out emails instead. (Better for the environment and less writer’s cramp.)

To everyone who made the list, Good Job!

 

Oh, by the way… Whether you were number one on the list this year or dream of someday making the list – it is a privilege working with all of you.

 Click here for more info on our clients and services.

Revolutionizing The Construction Industry

The other day, I was talking to a friend of mine about drones. More specifically, drones in construction. He asked, “What do you think a drone needs to do in order to make it revolutionary in the construction industry?”

I think for a drone to revolutionize the construction industry it has to do something that we would never expect out of it. What if the drone could build the “as-built” model of a project? There is already software that can take camera input and build a model of a room. Now just grow that idea and enlarge it for the entire project. You could create a building walk-through of an existing project that may not have a Building Information Model (BIM). You could even augment the model that is already created. Once the information is gathered, the uses of that information would be limitless.

Oh, by the way… You can read more about drones in construction here.

Estimators Know More Than The Basics

Estimating knowledge needs to go beyond the plans and specifications. I feel that the more the estimator knows about other trades, the better estimator they will be. Beyond the actual construction features, an estimator will need to know about the geography of the area that they are working in. This geography is the study of the land, local features, and the local culture of the area. Knowing the latter part will help when determining labor production and also wage rates. Doing work in the Florida Keys is a lot different than in Miami. It is not just miles that separates these two markets! This knowledge is crucial when bidding a project.

Oh, by the way… I like to dedicate at least a half hour of each day reading the national paper, so I can keep myself up to date with what is going on and also to hone my geographical knowledge. However, there is also a lot that can be learned from traveling to these locations. I didn’t learn about Aloha Fridays and their influence on Hawaiian labor by reading the paper!

america

Another Oh, By The Way… Check out the map to see where in the nation Tempest Company has performed work.