These 10 steps can help developers avoid headaches, delays, higher costs and legal complications.
Developers beginning construction projects of any size or value should be aware of the potential for delays, overruns, conflicts, defects and failures. According to an June 2016 article from McKinsey & Co. Inc., large projects across asset classes typically take 20% longer to finish than scheduled and often end up well over budget.
There are many ways to successfully complete a construction project, but they all require effective preplanning, oversight and cooperation. Here are 10 suggestions for planning and managing construction projects to ensure that they’re on time, on budget and built well.
1. Careful Contracting
Aside from the construction work itself, the contract is the most important part of the project. A well-written contract carefully and clearly defines the parties’ agreement, their expectations, and their respective risks and obligations.
Owner-drafted contracts often seek to protect the owner from all possible claims. These contracts contain exculpatory language, waivers and limitations that are intended to bar nearly all claims by the contractor. The idea is to protect the owner from all foreseeable and unforeseeable risks by shifting responsibility to someone else. However, one-sided contracts could generate as many claims as they prevent. When a one-sided contract forces a contractor to lose money on a project, claims are inevitable no matter what the contract provides. In a worst-case scenario, severe losses may force a contractor out of business, resulting in a failure to complete the work and the attendant delays, disruptions and increased costs.
To avoid construction disputes, allocate project risks fairly. When no party has direct control, risk should go to the party that is best able to protect against an unexpected loss or to the owners. They initiated the construction project and ultimately benefit from the finished product. Risks can include things such as right-of-way acquisition, security, environmental concerns or procurement methods.
2. Independent Cost Estimates
To reduce budget overruns, spend a little extra money and obtain independent cost estimates as the design process progresses. This involves checking and double-checking the cost estimates with contractors who actually perform the work and suppliers who deliver the specified products. Don’t delegate this task to the design team.
3. Establish a Firm Budget
While every project has a budget, some budgets are firmer than others. Owners should establish the budget from the start and hold the designer to it. Also, contracts with designers should require them to revise the plans at no cost if bids exceed the budget by a stated percentage. These provisions can be difficult to negotiate with designers, but they provide an important safeguard for the owners.
4. Use ‘Add and Delete’ Alternatives
Under this approach, the design team preplans certain components of the work. The owner can delete them if the bids come in too high, or add them if the bids are lower than expected.
Cost estimates are prepared for each alternative to ensure selection of the best systems and components. Preplanned “add and delete” alternatives protect the owner from the delays, disruptions and extra expense caused by redesigning the project after bids are received. It also shifts consideration of alternatives to the design phase, where the ability to control costs is the greatest.
5. Peer-Review the Design
An incomplete, inaccurate or poorly coordinated design leads to a project with conflicts, unanticipated costs, delays and claims. Conversely, an accurate and complete design diminishes the risk of conflict and protects the owner. Peer review involves an independent architect or engineer reviewing the plans to uncover errors, omissions and inconsistencies. The modest costs help avoid the delays, disruptions and extra expenses involved when design errors turn up in the field after construction is underway.
6. Review the Plans for Constructability
Constructability describes the ease and efficiency with which structures can be built. The constructability of a building largely depends on the quality of the designs. In a constructability review, a contractor identifies errors, omissions, ambiguities and conflicts in the plans and specifications before work begins. One type of conflict could involve plans that call for two work disciplines to occupy the same space at the same time. Another might involve lack of coordination between related systems. A simple example would be when the length of a concrete anchor bolt in the specifications exceeds the thickness depicted in the plans for the concrete element that the bolt will penetrate.
Again, although this service involves an extra expense, it is well worth the cost.
7. Set a Reasonable Schedule for Construction
The timeline for a construction project should be driven by its scope and needs. Never start a project under undue time pressure — the work almost always suffers. Too much time pressure could motivate a contractor to cut corners. That leads to poor workmanship, which in turn leads to construction defects. For example, if the weather is worse than anticipated, or market conditions affect lead times on materials, give the contractor adequate time to do the job correctly, even if that requires a reasonable extension.
Also, when construction begins, contractors expect all permits to be in place. They also expect to have access to the job site and the finished work of other contractors who came before them. They also expect to receive timely engineering and owner-supplied information. Shop drawings should be promptly reviewed, and unexpected conditions or changes fairly compensated. If these expectations are not met, delays inevitably occur.
8. Submittals as Communication Between Contractor, Designer and Owner
Shop drawings are completed before construction and contain all the details needed to build the project. They take the designer’s plans and show exactly where everything will be located. In addition, they are a step-by-step manual of the construction process and a bridge between the contract documents and the contractor.
The contractor reviews the shop drawings to coordinate the tradespeople and verify that the project can be built. The designer reviews the shop drawings to ensure that the proposed construction scheme meets the design intent for the completed structure and the owner’s expectations.
The shop-drawing submittal-and-review process should be a dialogue between the designer and contractor. It is the best opportunity for the owner, contractor and designer to avoid claims from nonconforming or defective work.
9. Review Construction Activities
The prudent owner will keep a close eye on construction progress. Owners often leave project oversight to the construction manager. That means they frequently have no knowledge of conflicts brewing in the field, whether involving unpaid invoices, progress delays or defective work. Some conflicts eventually become claims. By the time owners learn about a claim, the dispute is often more disruptive and costly than it would have been had the issue been detected and properly managed earlier in the process.
By regularly reviewing construction activities, an owner improves the chances of uncovering conflicts. That reduces unexpected change orders, detects potential design errors, reveals poor construction practices and avoids claims.
Periodically looking over the project meeting minutes is one way the owner can review construction activities. Although the construction manager is responsible for overseeing construction activities, occasional independent review by the owner improves the chances of recognizing conflicts early, particularly when the construction manager’s own errors may have caused or contributed to a problem.
10. Periodic Audits of Contractor Billing
Construction audits are a useful and important monitoring tool. They can assess whether the project is on time, behind schedule or ahead of schedule. Periodic project audits can detect fraud, including contractor overbilling, inappropriate cost-shifting, abusive change-order practices and other abnormalities. They also can ensure controls are in place, verify contractor compliance with government requirements (e.g., prevailing wage, disadvantaged business enterprise) and help avoid litigation.
It’s Worth It
Failing to incorporate these suggestions not only has a financial impact. It can also lead to severe setbacks. Incorporating preconstruction and construction phase planning and review concepts is a first step toward avoiding negative outcomes.