It seems that a vast number of companies do not know, or care, how much it really costs to construct their projects. They just spend what ever it takes. I have seen this attitude in organizations on local, regional, national and international operations. This problem ranges across the spectrum of project types and value from small to major projects.
There are several common themes that occur with each of these firms:
- The concept that a budget can be established and managed is one that has never entered into their management process.
- The concept that decisions made during the design process will not have any cost impacts on the project.
- The belief that the faster a project is designed and construction started, the more money will be saved.
However, the costs can be controlled during design by controlling the scope and delivery process of the project. This can be done in a manner that will enable the bids to come in very close to the budget. If scope is allowed to increase it can be identified and the value determined so there are no surprises at bid time.
Costs can be controlled during construction by having a defined set of documents that can be issued to the bidders and a construction process that meets the needs of the project.
2 Comments
Don,
Your observations are correct. Given that we are now in the digital age, it seems that we still want to hammer and chisel our old procedures versus using the new tools wisely. To successfully adjust to take better advantage of the computer age I have taken a different route to prepare contract documents. It begins with estimating a project in three different ways — traditional cost per square foot, the use of related functional use areas, and a Construction Specification Institute breakdown. The advantage is to have a comparison and know more about where the costs centers are. From there I move to preparing the first draft of the specifications (all of the money resides within the quality/value of the specified items. It is then that the design begins. Now to make this whole process even better is to have a detail book with every drawing in 3D with a dimension of at least one foot in width. Again using the computer to aid in the drafting of 3D documents, there can now be a quantity takeoff. In addition, every detail has references to every specification item that is included. The goal is to now be able to provide current estimates again in the three formats. Now, when something is out of balance, we know if it is in the area, the functional area, or the specified products area. Value engineering is now easier to accomplish.
The result of using this approach is to now design projects within $50,000 variance to the bid amount of $20 million or with less than ¼% difference. What is now even more exciting is to prepare the first drawings in 3D and provide clients fly through sketches to aid everyone in seeing the vision. Again, this makes the preparation of A/E work more real in terms of the vision combined with the cost and quality.
My approach is just a rethink, but I believe that my method yields great projects that fit within the values a client wishes to receive. Because the last step I can be to play “what if” analysis for both upgrades and reductions to balance the whole financial solution to find the best value.
Just my thoughts that are based on my successful experience to deliver projects on time, within budget and with highest quality. I began developing this approach in 1988.
Rich
Don,
Sometime we should talk about the use of Performance-based Procurement. The results using this approach has been to achieve all projects on time, within budget and without change orders (unless absolutely unforeseen) and this is true in the public sector. It is amazing what “Win-Win” means for project success.
Rich