CREJ - Retail Properties Quarterly - May 2016
As humans, I believe we have an innate desire to help other people. Having worked in the construction industry for around 20 years, I often find that “fix” when I am asked to help people coordinate a budget cost estimate, which often is necessary to make a deal work. First, and foremost, I confess that I am not an estimator, nor do I pretend to be one. I do, however, get the same satisfaction knowing I am part of the team that is working to make a project successful. Our company doesn’t always get calls to do budgets. Instead, sometimes, drawings are complete and a “hard bid” is sought for retail projects. In these instances, we are engaged to provide a number to build a project. As a general contractor, one must to be flexible in his approach. If we only offered to hard bid when plans were complete, we would be doing a disservice to our industry and would not properly be doing our jobs. What do I mean by hard bid, you ask? Actually sending plans out to the subcontractor market, instead of relying on recent historical data and adjusting for future cost changes. There are more challenges involved in the budgeting process than in the hard-bid process. When we are asked to do a budget, there are many variables, including existing conditions and unknowns. Existing conditions even matter when the site is just a piece of dirt. If, for example, the soils tests show clay, like we have here in Colorado, it is possible that an engineer may require caissons or piers drilled into the earth for building stabilization. When a budget is provided on an existing building, especially an older one, it is very difficult to know what might be behind an existing wall. Setting aside a contingency of money for unknowns is a great idea. However, I have seen times when the contingency was not enough or is eaten up quickly. This makes for an even more challenging project. Working with reputable companies that understand the costs of materials and stay close to the market conditions can help avoid these problems.
Often solutions to unforeseen problems can be mitigated by solutions that were uncovered during the budgeting phase. For example, sometimes surprises about what is behind a wall can be mitigated with a building’s original set of drawings. Getting a contractor involved as early as possible can help with cost control, client expectations, building department regulations, preconstruction, budgeting and value engineering, just to name a few. In retail, however, contractors are not always asked to weigh in with their design-build experience but, instead, just asked to provide the lowest competitive bid they can for construction costs and materials. When this happens, problems can follow. Often what happens is that once a project is awarded, the contractor alerts the client that part of the design or some of the proposed materials won’t comply with the city or state codes. When this happens, new materials are requested, change orders are made, costs run up and timelines are pushed back. I am going to make the assumption that if you are reading this, you understand or are familiar with the costs involving architectural, engineering, testing and inspections. There also are many external influences that affect the price of construction, including the time of year, soil conditions, weather, subcontractor availability and architectural review committees. Building departments are busier in the spring and summer with inspections and a higher volume of plan submission. This usually results in longer turnaround times for comments and approval. In the flurry to process the volume of project documents, the municipality’s comments can be incomplete, resulting in changes and delays to accommodate the building inspector who did not catch it in the field. Budgeting, after all, is supposed to help mitigate some of these things. In a perfect world, we should have plans, engineering and soils reports developed with a team of subcontractors and a qualified general contractor. Let’s face it. With all the above mentioned, there is a lot of cynicism and fear associated with the overwhelming volume of tedious information, but it is overcome with experience and truth. Don’t fear. I have some suggestions for success: • Compile as much information as you can about the site and building. • Establish start and finish timeframes. • Assess the building department’s ability to perform during the preconstruction process. And one last important one – don’t go cheap on the drawings and engineering. Your change orders will be inversely proportional to the amount of money you spend on project documents. The accuracy of your budget will be proportional to the amount of accurate information you provide. Develop a relationship with likeminded construction professionals who will contribute to your success as much as you contribute to theirs.