Capital programs often represent one of the most expensive line items in a company’s budget, but many organizations lack the in-house resources to adequately manage construction projects to mitigate risk, reduce cost overruns, and meet their project’s goals and objectives.
For companies without a construction management department, project planning, management, and execution can be an overwhelming and costly task. Proper oversight is imperative to success at every phase of the project’s life cycle.
Outlined below are key considerations during four life cycle phases companies should address when taking on new projects to help make the project successful:
Before undertaking a construction project, leadership, and stakeholders should understand and align their final project goals and agree upon a strategy to achieve them.
A feasibility study can help ensure that the organization is aligned before committing business resources, time, and budget.
During preplanning, leadership should discuss putting inbuilt processes and controls in place to manage the various teams and deliverables. They should also develop open lines of communication to keep stakeholders informed of progress at every stage.
Long before breaking ground, it’s important to understand your final vision for the project and how to achieve it.
- What do you want to accomplish? What’s the purpose of the project?
- Where’s the best location given the purpose of the property?
- What’s your budget, funding sources, and proposed timeline?
- How are you going to track and communicate progress, safety, and quality?
- Who composes your team? Are they internal or external? Who’s responsible for what?
The planning phase, arguably the most crucial and often the most neglected, is essential for project success.
Without a cohesive and comprehensive project plan, the risk of regulatory violations, inefficient operations, project delays, and budget concerns increases.
In the programming phase, a project’s overall strategy should be implemented, with decisions being made as to how you’ll reach your objective and who you’ll engage to help you along the way.
Stakeholders should align on clear responsibilities, resources, location, and designs that maximize the constructional and operational efficiency of the development.
Specifics of what to look for in each of those areas are detailed below.
Identifying the correct team is essential to the success of your project. Common parties include attorneys, contractors, architects, engineers, bankers, CPA firms, and so forth. Organizations should understand who would be ’s necessary, both internally and externally, to bring your project to fruition.
Once the team is identified, developing clear roles and responsibilities will ease the management of the project and optimize the timeline. Communication structure and feedback loops should also exist, allowing stakeholders to have a clear understanding of project developments and make informed decisions.
The team you engage should have a deep understanding of the nuances of the location you selected and experience with similar projects in objective, scope, and region.
There are many considerations to make when selecting a site. Many projects fail due to a lack of understanding of local regulations, site search parameters, and labor markets.
Ultimately, the final objective of the project should inform the site selection process, but variables like land use laws and regulations, entitlement needs, and labor costs can complicate the process.
Site selection could include hiring real estate brokers and land use lawyers to assist in the procurement of the right location to fit your needs.
The design phase ensures that your property ultimately meets your objective while also staying within budget.
Leadership should work collaboratively with their design team–whether internally or externally sourced. The purpose of the project should inform the design and an effective composition should be one that takes operational and financial efficiency and objectives into consideration.
Understanding the funding options available to you will determine the proper channel to finance your project. Whether the funds are business loans, grants, or municipal bonds, it’s important to understand the risks, stipulations, and requirements of each financing type.
To secure a private loan, organizations will need to provide their lender with detailed information such as construction timeline, floorplans, suppliers, contractors, and more.
Lenders often send representatives to the job site to confirm the project is progressing as promised before issuing funds for subsequent phases. This makes it imperative that companies manage each phase of construction to meet agreed-upon checkpoints, timelines, and budgets as to not default on loan requirements.
Public financing like grants require extensive applications. These funds also usually have audit and compliance requirements. Organizations will need to have quality controls in place to meet grant stipulations.
Regardless of whether a project is privately or publicly owned, it’s helpful to engage a qualified advisor who assists in the development of your budget and navigate the complexities of securing funding.
They can also review the funding compliance requirements and confirm they are met. The construction advisor should have experience working with various lenders and fully understand the construction process—from inception to completion.
Organization, measurable goals, and attention to detail are essential elements of effective construction management.
Determining clear project objectives, plans, communication pathways, scope, roles, and responsibilities can help your project stay on track.
Contract and Bidding Considerations
Before starting construction, it’s beneficial to obtain comparative bids on all contracted and major subcontracted work, such as mechanical, plumbing, and electrical.
Requiring three bids is a good starting point because it offers an effective comparison between bidders to verify cost competitiveness without being overly burdensome for either the contractor, owner, or developer.
Careful use of contract language could be the best way to mitigate risk and avoid costly overruns and delays.
Below are a few contract considerations.
- Clarify allowable and unallowable labor
- Set rates and caps on contractor-owned equipment
- Lay out strong cost-of-work definitions
- Define change-order reporting requirements
- Add a right-to-audit and accounting records section
Construction projects can be risky, but organizations can recoup investments of time and money by leveraging knowledge and objective feedback from qualified, experienced construction auditors.
Construction contract audits provide objective analysis to assist stakeholders and contractors with information they need to improve performance and operations, reduce noncompliance costs, and contribute to accountability.