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Missing a commercial deadline can be like watching a slow-motion train wreck.

· October 11, 2012

Last summer, I went to the county fair and stopped by a booth for a local pre-school that was under construction near my house. I’d been watching construction progress through varying stages, when I would occasionally pass by that direction. I think it was early June when I saw it last. With less than three months to school starting, the amount of work left made me think they would be hard pressed to finish in time for the school year.

When I talked with the owner, it was clear that she was expecting, or hoping, her school would be open for business for the start of the year. She had made commitments with that expectation.

Commercial businesses are critical because time truly is, money. While it’s true that every situation is different, still I can imagine… They already bought the land. They borrowed heavily, leveraging their house (and perhaps even retirement investments) to design and build a beautiful, brand new 8,500 square foot specific-use facility from the ground up with all the landscaping, parking and water retention required by Building Code. They have enrolled kids for the 2012-2013 school year and taken enrollment deposits. They hired teachers and contracted with utility companies and vendors. In addition to payroll and vendor commitments, they most likely started making payments on their debt and they won’t stop hemorrhaging money until they have kids sitting in their school.

I know you can understand how important it is they get the project finished on time. Arguably, all owners want to make sure that their project finishes on time and on budget. It may be even truer for commercial and institutional owners where time is literally tied to money.

Now, I usually don’t drive in that direction of my neighborhood, so I haven’t thought about the school for some time, but the other day my wife and I were talking and for some reason that school came up in our conversation. She tells me that it still isn’t done.

Right about now, I can imagine those owners going a little crazy because the project isn’t finished yet. They cannot get an occupancy permit until it is finished, and they cannot use the facility until they get that permit. At worst, they have to start incurring some vendor and payroll costs. The owners may have to return deposits and they may have to wait a semester or two before students are again enrolled in the school.

When I started casually watching the job progress, I had a sense that all was not well in Camelot. Construction Professionals can easily spot issues that will cause project delays. Sometimes it’s like watching a slow motion train wreck and what’s hard is relating these predictions to an optimistic owner.

In the end, it is always possible to look back and find which events or series of events were responsible for the delays, but it doesn’t matter. This owner is now in the midst of that horrifying construction experience that makes people usually end up saying, “I’ll never do that again!”

While there are some actions that will probably get the project moving again, in construction, it is always better and cheaper to act proactively than reactively. Unfortunately since the deadline has passed, anything the owners do at this point is damage control.

Categories : Uncategorized

Tags : Commercial Construction, Construction Management, LinkedIn, Project Management

Help! My contractor is adding additional terms!

Posted by Richard Cartright

· August 23, 2012

The following is a question and answer session from the Norwich Bulletin, followed by a response from Richard Cartright, the Founder of Construction Conductor.

Q: I hired a general contractor to oversee a home renovation to my property, a 988-square-foot two-story farmhouse. The contractor charges me 20 percent plus an hourly rate when he is on the site.

He does not inspect the work his subs do because he says they are professionals and don’t need to be watched. He has come up with two payment plans. Plan A is $5 per hour plus 20 percent ($80,000) and plan B is $50 per hour plus 10 percent ($70,000). If I don’t agree to his terms on things, he says he will be following plan A rather than B. I feel trapped, confused and helpless. Not to mention everything is breaking. Can you help me?

A: by Dwight Barnett, a certified master inspector with the American Society of Home Inspectors. So the general contractor is making 20 percent profit on the work performed by the subcontractors, plus he charges you by the hour when he’s there, but he does not oversee their work. Bad idea!…

The general contractor is responsible for all work completed by the subcontractors….

It’s time to sit this person down and explain that you want a contract with a finalized price, a time frame for completion, a copy of his insurance and licenses, if required, and all permits filed with your local building authority.

Do not pay another dime until you have had the work inspected and approved by a building inspector from the county or by a home inspector of your choice….

If the job is already finished, hire a home inspector to check the completed work, and if there are damages, improper or incomplete repairs, seek the advice of an attorney.

****

Richard Cartright’s Response: Dwight might be a top-notch home inspector and he does have a point about getting the work inspected by a professional inspector, especially since the contractor has stated he will not inspect it. However, in this case his advice doesn’t actually solve the problem.

First, think about the question being asked. While on the surface it seems like an inspection question, the greater question is one of contractual obligation and responsibility.

-Was there a contract put in place when the owner initially hired the contractor?

-What does the contract say? What the contract says and doesn’t say are equally important.

-Is the contract valid? Every state’s laws can differ, but each state recognizes that for a contract to be valid it must contain some basic common clauses.

Answers to these questions help determine the best solution.

What we know from the question asked is that the homeowner hired the contractor and, after the fact, was provided with additional terms and feels trapped by the limited choices. We don’t know the terms of the contract, that may or may not have been, executed by the parties or how much, if any, work has been done. Every project and its circumstances are unique and there are different strategies you would employ depending on the specific circumstances of the project.

For example:

If the project has not started, take a step back and use something like Construction Conductor to assemble a bid package, competitively bid the project, select the best bidder, define your terms and issue contract(s) that protect you and manage the construction. Saving time, money and headaches.

Alternatively, if the project is underway and near completion of any of the critical construction points such as foundations, framing, rough in, commissioning or finishes, immediately get an inspector to inspect the property and get an official report. Use any problems you find in the report to slow the project down, by getting the contractor to address them before continuing. In the meantime, carefully read your contract (assuming you have one) to find out why the contractor thinks they can spring seemingly ‘new’ terms on you during construction. Consult with an independent project manager, and depending on what you find, strategize a solution with your independent project manager. There is no one-size-fits-all solution so don’t even think that you’ll find one.

As far as what is common to pay General Contractors, here is a general rule of thumb:

General contractors generally charge (in nice round numbers) about %10 for overhead, which often includes some project management time and %10 profit on expenses and overhead. They often can charge between $50 and $100 per hour for project management, so when they include it in overhead, they do not include much time for it.

When they charge project management by the hour they should/could /can reduce their overhead cost slightly and are far much more willing to be attentive. For the most part, the whole reason you hire the GC is to oversee the project and the project quality. They are working for themselves, and if you let them they might give you the lowest quality work while telling you it’s the best.

Knowing this, I would work to negotiate the fees and plan to use a professional inspector as part of your ‘Owner Team’, as I talk about in my workbook, to make sure all the contractors are giving you what they contractually owe you. If you still need help feel free to give me a call.

Please ask your construction questions at: https://constructityourself.com/contact/

Categories : Uncategorized

Tags : Construction Contracts, Construction Management, Contractors, LinkedIn

How much time will it take to manage your own Construction Project?

Posted by Richard Cartright

· August 7, 2012

Some owners think a professional construction manager is not needed. They are sure that in just a few short hours per week they can keep in contact with all their subcontractors, make material choices, manage the project’s finances and even deal with the building inspectors. “It shouldn’t be all that hard,” they say to themselves, “why pay for services I don’t need?”

Okay, that’s one way of looking at it. But, before making that decision, it might be a good idea to think about it a bit more; especially to gain an understanding of everything involved in managing a construction project. There’s actually quite a bit of work that needs to be done, even before the project begins. Not only does the project need to be put out to bid, but the schedule needs to be written, the scope of each contract needs to be developed and the plans need to be drawn.

There are some things which need to be done, no matter how big or small the project. Pulling construction permits and dealing with inspectors doesn’t change with size; nor does the selection of carpet and paint colors. No matter how big the project is, these things have to be done.

On the other hand, there are items which are highly dependent upon the project’s size. Developing a schedule, project specifications, plans and blueprints are all items that are affected by the size of the project. Even though there might be an architect generally taking care of the plans and specifications, they do so with the input of the owner. The bigger the project, the more questions they’re going to have and the more time the owner is going to have to spend discussing options, making decisions and checking the plans and specifications.

Then there’s the actual management of the construction work. Communication is key to a successful construction project, not only verbal communication but written and visual communication as well. When ample time isn’t given to properly document decisions that are made and instruction that is given, there is more opportunity for misunderstandings, errors, and even law suits.

Then there’s the need for regular inspections and reports of the project’s progress. Why are regular inspections and progress reports needed? Because without regular inspections, there is no way of knowing whether the contractor is doing the work according to what is expected. How can you know if the change to a position of a wall is actually done, if you don’t check it? How can you know if the right size plumbing pipe is used without measuring it yourself? You can’t count on the contractors doing what you say, without checking their work.

There’s a great management saying, which applies very much to construction, “People do what you inspect, not what you expect.” Never assume your contractors are doing what you expect, unless you take the time to inspect their work. This would be even truer in cases where what you expect isn’t the norm. If you had the architect specify 4” drain pipes for your toilets, and the plumbing contractor is used to using 3” drain pipes, he might very well put in 3”, even though you are expecting 4”. Unless you inspect his work, you’ll never know.

The reality is that daily communication and regular inspections are an absolute necessity for any construction project. All of this needs to be thoroughly documented, to protect you as the owner. If you don’t do so, you are asking for trouble.

The real question isn’t whether or not you can manage your own construction project; it’s whether or not you have a system that helps you organize the time to do so. If you can’t dedicate a couple of hours per day to managing the project, you don’t have enough time. You won’t end up happy with the results, because your contractors will misunderstand you at every turn. Your project won’t be successful, but rather, be a series of ongoing problems for you.

That’s where Construction Conductor and Construction Coaching come in. With Construction Conductor you get a complete understanding of all the terms we talked about above. You get the secrets to using project management best practices and get the tools necessary to ensure every project is a success. You’re taught everything you need to know about practical day-to-day construction management. A dedicated Construction Coach who knows everything that needs to be done and how to do it is has the time and knowledge necessary to ensure that everything on your project is completed and inspected properly. That ultimately saves you time, money, grief and gives you a better finished project.

Categories : Construction Management, Featured, Project Management, Uncategorized

Tags : Construction Management, LinkedIn, Project Management, Project Manager, Residential Remodel

How fees consume your project budget.

Posted by Richard Cartright

· July 24, 2012

Every Project Costs Money

People know that every project has materials, labor, and equipment costs, but people often forget about the cost of design, permitting, and management fees. All of these costs and fees can be reasonably predicted, and the more you know about the project details, the more accurately you can predict project costs.

People may opt out of including something to try and save money, but excluding important things like permits fees and design when needed, commonly has unintended circumstances. So how can the owner save on construction costs? on small jobs, you can manage the project yourself and save the cost of a General Contractor.

Owner Representatives or Owner Agents use special tools and systems and inject objectively comprehensive knowledge to streamline how projects are designed and built, saving time and money. By helping you make the right decisions the O.R. is the most effective way to keep costs low.

An Owner Representative is worth much more than the cost and can cost less than a General Contractor.

The following calculator helps you see how fees affect the amount available to purchase material and labor. Input a project budget in the green field on the calculator and using the drop-down-boxes on the left, “include” or “exclude” the Fee items to see how the costs consume your project budget.

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This calculator simplifies the fee calculation, so fees shown may not reflect actual project fees.

It is intended to showing how various fees can affect the project budget and illustrating the point that: Owner Representation saves more money than it costs.

Here is a little more about the logic used to build the calculator:

The percentages reflect common project averages.
Owners legal, unique conditions, special costs, and owner purchased items are not included because they are too project specific to average for this model.
Contingency is 15% of the project budget, but commonly fluctuates between 5% and 20% cost of construction.
Savings realized using an O.R. is reflected in an average reduction in design and contingency.

Categories : Uncategorized

Tags : Construction Budget, Construction Management, LinkedIn, Project Management

Tricks Contractors Use to Make Their Bids Look Lower

Posted by Richard Cartright

· April 9, 2012

The world of construction is very competitive. Most jobs are awarded to the lowest bidder, regardless of any other considerations. Since contractors need work in order for their businesses to survive, they can become somewhat desperate, doing a number of things to lower the apparent cost of their bids; not all of which are totally ethical.

The contractors who utilize these tactics are able to bid lower, because they are aware that they can make up for the difference after the contract is signed. More than anything, they are depending upon the idea that once the job is started, the customer will need pretty serious grounds to break the contact. So, they can find ways of increasing the contract price, without making the owner angry enough to cancel their contract and award it to somebody else.

So, what are some of these “tricks” which contractors use?

Providing Inadequate Allowances – There are a number of items which need to be paid for as part of the project, which the contractor needs to include in his bid. These include such things as utility hookups, building permits and liability insurance for the job site. By lowering the allowances, then “discovering” that these items cost more than expected, the contractor has a somewhat legitimate excuse to pass that change through to the owner. Another way that inadequate allowances are included is when decorative items must be selected by the owner. A $1,000 lighting allowance may be included in the bid, meaning that the cost includes $1,000 worth of lighting fixtures, to be selected by the owner. However, in a 5,000 square foot home, that may not be enough. Anything over that allowance would be legitimately charged to the owner.

Locating Cheaper Material – While everyone is trying to save a buck, there is a line that shouldn’t be crossed. When buying cheaper materials means accepting lower quality, the customer ultimately ends up paying for repairs and replacement down the road. The problem is that materials specifications generally aren’t sufficiently specific to prevent this. To try and create them that specific can be a monumental task. So, the contractor can often legitimately lower their cost and still complete the project. One way that this might be done is to buy green lumber. While this isn’t in agreement with industry norms, it is not all that uncommon in tract home construction. Generally speaking, green lumber is cheaper. However, due to its high moisture content, it will warp much more. That puts extra stress on the completed building structure, possibly causing problems such as walls that eventually start to bulge.

Excluding Parts of the Project Scope – Many plans and specifications leave wiggle room for the contractor to “miss” seeing something that needs to be done, such as removal of a dilapidated structure that is on the property. If it isn’t noted as a requirement, then the contractor can say that they didn’t know they needed to remove it, even though it’s in the way of the new construction. This allows them the opportunity to create a change order, charging the customer for this “extra” work.

Using Unqualified Labor or Sub-Contractors – Just as the client is putting the project out for bid, so does the general contractor. General contractors generally award the contract to whoever provides them with the lowest bid. While sometimes this works out fine, there are other times when it doesn’t work out well, especially if the sub-contractor really isn’t qualified or has a reputation for low quality. By accepting their bid, the contractor is giving away the customer’s quality.

As you can see, all of these appear somewhat legitimate. That’s what the contractor is counting on. They expect the owner to see those extra costs or lower quality materials as something that is totally acceptable. As such, they receive payment for a job that’s not so well done.

This is one of the places where a project manager, acting as the owner’s representative, can protect the owner from problems. Having the experience of many projects behind them, owner representatives know what to look for and where to find these sorts of loopholes. When a contractor presents a bid that is too low, they know where to look and what questions to ask, to ensure that everything which should be included, is included in the cost. Owner Representatives also know what they’re looking at, when they look at the raw materials brought onto the construction site, so they can tell if a contractor is cutting corners on the materials they are using.

Your goal, as the owner is to get your project done at a reasonable cost. The contractor’s goal is to make money. Unfortunately, they’ve got an advantage over you; they know tricks that you don’t. Having an owner representative protect your interest will help ensure your project gets completed in a way that’s fair.

Categories : Bidding, Uncategorized

Tags : Construction Management, LinkedIn, Project Management

Can You Afford a Project Manager?

Posted by Richard Cartright

· March 16, 2012

Many homeowners look at the idea of hiring a Project Manager as an extra, unnecessary expense in their home building project. “After all,” they think to themselves, “I’m already paying an Architect and a General Contractor. Both of them are supposed to be managing my project, why should I hire another manager?”

That’s actually a very good question, one that I hope you’ll let me answer for you. First of all, these three people, the Architect, the Contractor and the Project Manager all have different functions, even though they look like they are all doing some of the same things. We need to understand what the difference between their different functions and different outlook is.

The Architect is concerned about the design of your home. He wants to build you something that is going to make him look good, while providing you with a home that will keep your family safe and comfortable. Although most Architects also claim to manage the construction project, what they’re really doing is making sure that your home is built according to their design and specifications; not trying to save you, the owner, money.

The General Contractor is concerned about how your home is built. More specifically, he’s concerned about how much it costs to get built. You have a contract with him, which limits the amount of money which you’ll pay for his services. So, he wants to make sure that the project costs less than that, ensuring his profit. He’ll do the best possible job, within those parameters. But, when push comes to shove, he’ll sacrifice quality to keep his profit.

The Project Manager doesn’t have to worry about the design or the profits. If you hire a Project Manager, he doesn’t need to worry about his profits, because you’re already paying him to do the job. His concern is that the whole project is completed in the best possible way, in order to make you, the customer, happy.

You see, the Project Manager is the only one of those three who is your advocate as an owner. He’s the only one whose best interests are to look out for your best interests. That makes his focus much different than the other two professionals whom you are working with.

The important thing in getting the maximum benefit from the services of a Project Manager is when in the overall project timeline the owner hires him. The greatest savings for the owner comes from hiring the Project Manager first, even before hiring the Architect. In this way, he can be proactive for the owner from the very beginning, before any other professionals are hired.

If the Project Manager is hired first, he can do the most good. As the owner’s representative, he can locate, interview and negotiate the best possible contract for the Architectural work. As part of this negotiation, the Project Manager can negotiate with the Architect to remove the extra costs associated with contract administration, communication and schedule management out of the Architect’s contract. Since the Project Manager would be handling these functions, there is no reason to pay the Architect for them as well.

By doing things this way, there is no additional cost to the owner for having a Project Manager on their home building project. In fact, since Project Managers typically charge lower rates than Architects, there would probably be an overall savings. However if the Project Manager is hired after the architect, then they are unable to negotiate the administrative savings, so the additional cost would be the cost of the Project Manager, less any savings that they can provide throughout the project. Finally, if the Project Manager is hired after the General Contractor, he is only able to provide damage control. His payment would be over and above whatever other contract costs.

If you feel that you need an advocate, someone who is looking out for your best interests in your home building project, then you need an independent Project Manager. Your Architect and Contractor may be friendly, qualified professionals; but they aren’t your best advocate, the Project Manager is.

Categories : Construction, Construction Management, Project Management, Project Manager, Residential, Residential Construction, Uncategorized

Tags : Construction Management, LinkedIn, Project Management, Project Manager, Project Planning