Apr 13, 2021
In capital planning, owners must spend smartly. Meeting constantly changing facility needs and capacities can be high-risk and extremely costly. Should you renovate or build something new? How much will it cost? And how do you execute the project successfully? With all these questions (and many more), one thing is for certain, it will involve some level of construction. For owners that want to build, removed risks and controlled costs should be standard equipment. This is a challenging endeavor, and many owners are embarking on these ventures without the help of construction expertise and insights that best inform their pursuits. In the first installment of our 3-part Owner’s Corner series, our experienced construction consultants reduce the complicated construction process to four things that you have to get right — from the start — for project success.
Construction projects can generally be broken down into four primary elements: people, product, price, and process. At Structr Advisors, we like to call these the 4 P’s, and they are usually encountered in that order.
Typically, an owner will want a built solution for a particular business need within a specified budget. The job of the design and construction teams is to collectively meet this need in form, function, cost, and time. To do so, the project design and cost will first need to be conceptualized for the owner to get an idea of how much funding it will take to make the project happen. Once the project’s scale and scope are framed and an estimated cost is derived, the buildout needs to be planned, coordinated, and managed—eventually turning the vision into a physical reality. While this all may sound relatively straightforward, capital projects are extremely nuanced endeavors riddled with uncertainty and risk. Fortunately, there is a method to the madness—the 4 P’s.
The importance of assembling the right project team cannot be stressed enough—this will pave the way to project success.
The essence of the team must be open communication and a willingness to work together with everyone putting aside any personal, professional, or project-related differences for the end goal of providing the highest and best service to the owner. For instance, architects can be resolute with their designs to which general contractors may reciprocate with margin-focused stinginess. When design meets means and methods, it is not always harmonious, often yielding a frustrating back and forth that can erode team morale as well as project quality and efficiency. The stabilizing influence that an empathic advisor contributes can bridge gaps within the team and activate earnest collaboration.
Teams that align well will put their heads together early on and “build up” the design of the project synergistically. A skillful advisor can act as a neutral compass, using their expertise to motivate a cooperative team dynamic and keep the project heading north. In doing so, they inspire a mutual integrity of design, and chaperon these project attributes through buildout ensuring that time and resources are devoted to where they should be—to the project. For discerning owners, having an insightful, experienced advisor as resource and ally throughout the project can prove to be invaluable.
Defining the desired scale, scope, and quality is central to project feasibility and success. Construction projects can be quite ornery and complicated, so they need to be thoroughly and thoughtfully considered.
The process of optimizing value and controlling project volatility starts at the beginning. By setting appropriate financial and functional parameters during visioning—where the scale and scope of the project take shape—common dilemmas like scope creep, schedule slippage, and cost overruns can be preempted. Having an unbiased construction resource apart from the core team to vet design and programming ideas and gain immediate, early feasibility and cost perspective further illuminates the path to project success. Investing the time to holistically envision the project at inception will significantly reduce problems down the line.
No one wants to approach a project feeling like they have just issued a blank check. Rough Order of Magnitude estimates for large capital expenditures should be as accurate as possible and act as a guiding influence as the project develops.
Consider the difference between being off 10% on a $1M project versus $300M one. As the project price escalates, exposure to risk is significantly amplified. If the construction expert is especially astute, “estimates” for projects can be quite representative of actual construction costs—no more sticker shock.
And project cost controls are not limited to concessions in design and materials or even value engineering. Think about the time and money lost in often redundant conceptual iterations (i.e., the design-estimating cycle). The benefits of quickly cementing the vision and optimizing the design within an established budget framework on overall costs and schedule can be profound. If this stage can be handled efficiently and effectively, the project fits the budget and is off to buildout.
Construction is a process, and unexpected changes can have a heavy ripple effect. Deft change management is critical to project success. Changes are inevitable. The key is having a plan for how you deal with them when they arise.
Scheduling a project is complicated enough but planning for change is basically trying to hit a moving target. How is certainty extracted from uncertainty? Once the design documents have taken form, a perceptive constructor will conceptually step through the project—building it in their heads from nose to tail—to make sure all elements are in order. Someone who knows the ins and outs of running a project will know what to look for, especially during high-risk, critical path transitions and phases (i.e., identifying unique project conditions, planning for long-lead items, coordinating specialized equipment, and integrating subcontractor activities and resources.)
No one has a crystal ball, but predictive planning based on experiential knowledge is the next best thing—eliminating surprises. Mapping potential pain points and generating actionable contingency plans can make the difference between a money-time pit and timely, cost-effective project completion. All of this requires attention to detail and intimate knowledge of the construction process and arms the owner with a fortified and comprehensive project plan.
The value of investing in expert advice early on can be worth its weight in gold. At a fraction of the cost of the project, enlisting the insight, foresight, and experience of a seasoned construction expert—neutral to the teams but operating in the owner’s best interest—can be instrumental in making sure money is placed in the right place on the right things. Accurately defining scale, scope, and cost at onset backed by an integrated buildout plan and project team leads to construction success. So, how do you account for the uncertainties in construction? By early onboarding of a trusted pathfinder to help guide the process from the very beginning.