Reality and Micro-Management: The Key Pillars to Saving Money on Construction Costs
In late 2016, First Standard Construction submitted a proposal on a 14-story ground-up residential project in lower Manhattan. Our bid was not the lowest offer given to the building owner, but we presented a detailed construction plan and schedule that would have been completed within 18-24 months at the latest. The building owner made the decision to work with a different contractor whose bid was lower than First Standard’s.
Fast forward three years and the building is still under construction with no end in sight.
A few months later, First Standard was given the opportunity to act as the general contractor on a similar project – a 12-story ground-up residential project at 440 Washington Street.
The construction started at 440 Washington on August 1, 2017. The project’s expected completion date was May, 2019 but First Standard was able to complete a complex foundation and framing three months ahead of schedule and completed the project in January 2019.
What happened with the overdue project in lower Manhattan? Why was a seemingly capable contractor not able to execute on their promise to this building owner while First Standard started a similar project at a later date and completed the project nine months earlier (and counting)?
There are several common missteps general contractors make when creating proposals for building owners in an effort to secure the building contract. These missteps lead to delays and additional costs from redoing plans and specifications. For example, Open-Ended Construction Schedules is an issue that plagues almost any delayed project.
When a scope of work is presented and approved, there is a clear stage-by-stage process which needs to take place in order to execute on the plans. On any significant project, there are many different sub-contractors involved and at the project’s outset each of those sub-contractors needs to be told precisely when their stage of the project will be and what the timeline expectations are for each of them. If a general contractor fails to confirm specific dates and timelines for their sub-contractors, they are setting themselves up for definite delays.
The First Standard approach is to plan out each and every day of a given project at the outset and confirm specific dates and timelines up front with each of our sub-contracting trade partners.
A Realistic Budget Is More Cost Effective than a Lower Budget
There is a misconception that lower budget numbers can be achieved without making sacrifices. It’s impossible. If a contractor tells you they can execute a project for 20% lower than any other contractor is bidding, the low bid will end up costing the building owner more than that 20% in the long run. Not only will they need to raise the budget to meet the needs of the project plan, but there will also be delays and additional fees because of plan, specs and budget adjustments. The aforementioned overdue project in lower Manhattan most likely has cost the building owner around an additional $50/square foot above its original cost as a result of poor planning and unrealistic low budgeting.
Regardless of a building owner’s budget an initial budget plan must be developed by an experienced contractor, followed by an evaluation of how a budget can be cut down to meet the building owner’s budgetary goals. The only way to achieve a successful, on-budget project is to begin with real numbers that represent the true costs of the project’s expenses and a detailed schedule that will result in timely execution.
Micro-Management Leads To Success
First Standard employs a rigid construction management process designed to streamline the construction process and reduce the risk of additional costs.
We develop our construction schedule by outlining a daily plan starting from day one of construction through completion. We interconnect each sub-contracting trade to the construction portion of the schedule and plan out the procurement process to make sure that all trades, materials and equipment are ready when they need to be for the project. Many general contractors simply produce a milestone schedule and put the responsibility on the trade to be ready without knowing when, how or why. We ensure, up front, that everyone involved understands the when, how and why completely.
Scope of Work
Prior to buying out a trade, our Project Management team dissects the project documents and prepares a written scope of work for each trade. This process allows us to educate sub-contractors on the project early and to review as many RFIs as possible, resulting in minimal delays throughout the construction process and reduced risk of change orders to ownership. You also gain a better understanding of how each trade is approaching their role when reviewing the scope of work with them ahead of time.
We are driven to hold our sub-contractors to the highest standard throughout the project, not just upon final inspection. The best people to make this happen is the team who prepared the schedule and scopes of work in the first place, as they are completely immersed in the project and understand the areas where there are potential issues prior to the work even starting.
Once a sub-contractor begins their portion of work, their progress is reviewed on a daily basis and compared against our initial daily schedule prepared before the job commences. The sub-contractors agreed to our timelines up front and if they are not on schedule, they must make the proper adjustments to catch up.
Over time, we have developed a list of sub-contractors who are comfortable with and buy into our management process, which is very important when running a project in the manner that we do.