Commercial Construction Tips – How to Come in Under Budget

If you are relatively new to the commercial construction business you might still have some things to learn. One of those things ought to be how to stay within your budget. If you do not have a plan for doing this it could become a constant and unnecessary battle for you. The key here is – having a plan in the first place. We are going to give you some ideas on what costs must be accounted for in your plan in order to determine what your individual project budget will be. Then you can proceed to plan how to meet that budget.

Unfortunately there are many common errors that occur when a commercial construction estimates their budget. The result is that quite often they do go over that budget. If you have a general concept of what those errors are you will know what to watch out for. Therefore, we will give you a list of what they are. In no particular order those factors are: price changes, omissions, unclear plans and specs, wrong assumptions, design changes, inadequate allowances, construction or design errors, cost-plus bids, hidden or concealed conditions, and design changes. This is some list! And this is only the list of known errors in budget estimations. It does not take into account all of the new issues that might crop up over time. But now you get a rough idea of all of the things that can go wrong. You and your leadership team may be able to come up with more possibilities right off the tops of your heads. Write them all down in your plan, and then proceed to discuss all of them in-depth.

Some things you will accomplish by dramatically reducing your budgetary errors are: to forge better relationships with your subcontractors, decrease the amount of time it takes your company to complete projects, and generally stay ahead of the ballgame. In addition to our list, we have some general tips for overall budgetary success. Our first tip is do not always accept the lowest bid. While you do want to keep your costs low, you also want to ensure you receive quality work. You will not necessarily get that from the sub-contractor that gives you the lowest bid. Do some investigating of your prospect before you go into business with them.

Our next suggestion is to always allow for any preventative measures; both from a safety standpoint involving any person who works on the project, and for things that could go wrong with that project. A lot of unplanned expense money on a project is paid out for medical care that is needed when people get injured on the job. Those injuries can be avoided if all safety guidelines and procedures are strictly adhered to. Additionally; when commercial construction companies fail to properly plan for anything that could go wrong on a project, that means more money will have to be shelled out to fix those things. This can be avoided if you allow for those kinds of expenses in your project budget to begin with. Remember the old Boy Scouts’ motto about always being prepared!!

Commercial Construction Tips – Facts About Construction Projects

Commercial construction is often an arbiter of changing economic conditions. Construction projects mean both an improving economy and a way to improve the economy of a given area. Read on to learn more interesting facts about it.

This type of construction helps public sector agencies as well as private firms. Big new schools in areas where people are moving give students a chance to learn in state of the art facilities. New office buildings bring jobs to the area, and the upward spiral continues. Not only do the buildings benefit the users, but the building process itself gives workers a solid job for several months, and the expenditures from the construction project go directly into the local economy.

The United States is second in the world in terms of this construction, regardless of where the company doing the building is headquartered. As much as 10% of all commercial construction takes place in the US, and New York is the city with the most commercial construction going on – $8.5 billion (that’s billion with a B) in 2013. A lot of the construction was for residential buildings. Following New York were Houston and Dallas. Those two cities spent $10 billion in 2013 on commercial projects.

One of the biggest trends in commercial construction is green building. Experts from the Environmental Protection Agency expect that by 2017 as much as 48% of new building will be done with green building materials. To put that in financial terms, it could mean as much as $145 billion dollars.

By 2018, 84% of residential construction companies plan to have at least some of their construction projects classified as green. To get an idea of just what kind of impact this has on the overall economy, consider that residential projects total as much as 5% of the current gross domestic product of the US. As more and more firms add green building to their plans, it might mean that as much as 18% of GDP will be based around green construction.

Big commercial office buildings are going green, too. LEED certification is becoming the main standard, and builders are up to 41% green as of 2012. Just how rapidly is this growing? Consider that only 2% of commercial construction, non-residential, projects were green in 2005. It’s no surprise that states like Hawaii and California are leading the way in LEED projects.

It’s not just the US that is interested in green construction, though. LEED certifications around the world are becoming more common. A study released earlier this year showed that as many as 69,000 LEED projects are going on globally in 150 different countries.

This construction is as important to the global economy as it has ever been, and the increases in such projects over the last few years signal a positive change after the worldwide recession of 2008-09 and the soft recovery that followed. With even more green projects being planned than ever before, commercial construction projects will also be kinder to the planet, meaning everyone will benefit for years to come.

Commercial Construction Tips – How to Know If Your Contractor Is Doing a Good Job

Big construction project or little one. An historic renovation in the heart of old downtown or a new retail center. No matter what kind of construction project you are undertaking, you want to feel assured that you have chosen the right contractor for the job. But how do you know that your contractor is doing a good job?

The success or failure of a contractor is often closely linked with you – how effectively you complete your hiring due diligence, how clearly you state your expectations, and how well you and your contractor communicate with each other during all construction phases.

Preparation and Selection

Before you begin your search for a contractor, you should clearly outline the responsibilities for which you will hold your contractor accountable. Those accountabilities should be included in the contract between you/your company and the contractor.

Next, you need to do your due diligence.

• Ask friends and colleagues who have worked with construction projects similar to yours for contractor recommendations. Ask these questions:

o How did the contractor handle the budget and materials?

o Was the project done on or ahead of time? If it was off schedule, why?

o Was the work done according to agreed-upon terms?

o Would your source work with that contractor again?

If their referral did well on each of those points, he or she may be a good contractor on your project as well

• Check ALL references!

Get it in writing

All good business relationships should begin with, “get it in writing!”

• Each contractor candidate should provide a written bid. Red flag: nothing in writing.

• You and your contractor should have a signed contract. Include details on the budget, scope of work, materials, the schedule, and the contractor’s specific responsibilities. Red flag: the contractor who won’t sign a contract.

• Your contractor should take notes during each walkthrough and meeting. Red flag: “I’ll remember… “

On the job

These are some important on-the-job clues that your contractor is doing a good job:

• Communication: you and your contractor communicate frequently and clearly according to your agreed-upon methods (text, fax, email, phone). Red flags: doesn’t return calls, is difficult to reach, provides limited responses to questions, communicates poorly with work crew.

• Subcontractors: contractor hires quality subcontractors with verifiable references. Red flags: conflicts on the job, petty thefts, on-the-job substance abuse, wasted time, etc.

• Safety: contractor diligently observes safety practices and insists that all workers comply with safety rules. Red flags: avoidable injuries, safety issues.

• On the job site: contractor is working at the job site for the majority of the time. The construction crew is busy during all working hours of the week. Red flags: contractor is infrequently on site, workers have too much idle time.

• Security: appropriate security measures are observed at all times. Red flags: equipment and materials not secured or missing, the site is poorly secured during non-working hours, unauthorized people are on site.

Schedule and budget

Ideally, every construction project is completed on budget and on schedule. Realistically, there may be some schedule interruptions and unexpected costs.

Ask yourself some final questions:

• Is my contractor providing me with accurate, up-to-date information on all aspects of the job and construction progress?

• Is he/she managing resources, budget, crew, and materials effectively and appropriately?

• Are crew members working fairly harmoniously with each other?

• Are my objectives for this project being met?

When you can answer yes to these questions, it is most likely that your contractor is, indeed, doing an excellent job for you. Congratulations on your choice, and your new project!

Commercial Construction Tips – How to Avoid Going Over Budget

A commercial construction project can seem like a never-ending balancing act, like keeping a series of plates spinning. One plate represents keeping the project on schedule. Another spinning plate is ensuring that construction is completed properly and safely. And still another spinning plate is containing the project budget.

A commercial construction budget is influenced by a number of factors. Exceeding the budget can easily occur for reasons beyond the control of the owner, contractor, and project manager, including:

• A sharp increase in materials costs during construction.

• Weather fluctuations that slow or halt construction.

• Work stoppages.

• Frequent alterations to the design, materials.

Make a list

As one industry writer stated, estimating a project’s cost is the first step of construction cost containment. The project budget should list the essentials (non-negotiables) as well as the negotiables (the aspects of the project that can be reduced, modified, or eliminated in order to contain costs. Each line item should be carefully researched, sourced, and have a realistic cost applied to it. The budget should also include contingency funding.

Cost control challenges

Cost containment challenges are not always line item-related. There are a number of less-obvious but significant challenges to staying on budget, including:

• Poorly defined scope of project.

• Flawed estimating methodology

• Lack of project management policies and controls.

• Unrealistic scheduling.

• Insufficient planned-to-actual cost comparisons.

The big three

This trio of cost containment issues has been stated before and they are worth stating again. If The Big Three of budget issues are carefully managed, you can reduce or eliminate a number of budget overruns:

1. Incomplete design documentation: the architect’s rendering, plans, and specs that are turned over to the owner or project manager do not always include the in-depth details necessary for realistic budgeting.

a. Solution: the contract between the owner and architect should specify that all members of the architecture team will provide complete details, specs, documents, and drawings related to the project.

2. Pre-bidding document review: some contractors do only a general review of documentation before submitting their bids.

a. Solution: the language of the project owner’s contract should require all contractors who submit bids to acknowledge, in writing, that they have reviewed all specifications and plans. The bid price should cover all identified and “implied or express design intent” work.

Any materials or changes to design that the contractor feels are essential to successful completion of the project (but weren’t identified in the project/owner’s documentation) also should be included in the bid, along with explanations for the additional items.

This requirement should reduce or eliminate the need for contractors to seek additional compensation based on additional work necessitated by information “not shown on the original plans and specifications.”

3. The low-ball bid: underbidding can put the entire project at risk and cause it to far exceed the budget.

a. Solution: solicit bids only from trusted contractors who have successfully completed similar projects. They should have documentable records of completing projects on budget and on time.

Another cost containment option

Another cost containment option is to hire a skilled construction cost estimator. That person or team works with you to help you avoid out-of-control expenses, keep construction costs down, and ensure the project is completed within the agreed-upon timeframe.

It’s up to you

Ultimately, it is the owner and project team who are responsible for overseeing each phase, change order, and plan alteration to the construction project. There should be a well-defined process for change order submittal, review, and authorization. There also should be continual monitoring and updating of the budget so that you and your team know where the project financially stands all the way to completion.

Commercial Construction Tips – How to Stay On Budget

Keeping a commercial construction project on budget requires determination, vigilance, creativity in problem-solving, and diplomacy. It begins almost at the moment a project is conceived and continues throughout the entire construction period.

There are many reasons a commercial construction project will go over budget. Some causes simply can't be adequately assessed or budgeted, such as delays and materials losses caused by a natural disaster. But many causes relate to poor planning and even weaknesses in the budgeting process itself.

Typical Cost Control Problems

Cost overruns on a construction project happen, despite the most careful planning and control efforts. Some common causes for overruns include:

  • Lack of a well-defined project scope.
  • Poor estimating methods (or standards).
  • Out of sequence start / completion activities.
  • Inadequate comparison of planned-to-actual costs.
  • Unanticipated technical problems.
  • Poor (or no) project management policy and control practices.
  • Faulty schedule resulting in overtime or idle time expenses.
  • Escalating materials prices.

Three Big Mistakes

Review some of the more egregious construction cost overruns of recent years and you might see a familiar pattern to budget overruns. They are commonly made mistakes that can be adjusted and corrected during the contracting phase of a project.

Managing these three weak areas may mitigate or eliminate many of the problems listed above:

  • Incomplete document design: a project owner may hand over the architect's plans and specs to the contractor believing that every detail has been identified. In truth, the owner-architect agreement often only requires the architect to present the plans and specs of a general design intent. The complete in-depth details may not be included. The lack of complete design information places the contractor in the position of demanding more money for work that had not been clearly defined in the plans and specs. Multiple change orders and budget overruns result.
    • Resolution: the owner-architect agreement should specify that the architect will provide a 100% complete set of drawings, specs, and all related documents prepared by engineers (and others working on the project). Responsibility for overages caused by incomplete design falls back on the architect, not the contractor.
  • Complete review of documents prior to bidding: the contractor may seek additional compensation for necessary work that, according to the contractor, was "not shown on the plans and specifications."
    • Resolution: the project owner's contract language should stipulate that all contractors wishing to submit bids must affirm they have reviewed the plans and specs and fully understand the scope and intent of the project. Their price should cover all necessary work to fulfill the "implied or express design intent."
  • The lowest bid: the project owner may face many pressures from investors, shareholders, and board members to accept the lowest bid. But lowest isn't always the best. Underbidding can be risky and costly.
    • Resolution : work with trusted contractors who have completed projects similar to the current one. The contractor with a track record of successful on-time and in-budget builds is far more likely to be able to produce the same results for your project.

The root of successful budget containment lies in allowing a sufficient amount of planning time to thoroughly define the scope, schedule, quality, risk, resources, and budget for the construction project before the bid invitations are sent out to contractors.

5 Handy Commercial Construction Tips

You might have been put in charge of a commercial construction project recently, and though you appreciate your boss's stamp of approval on the work you are capable of doing, you might not know all of the components that go into the project. Here are some handy tips to keep in mind as the project progresses.

1. Start by hiring a good general contractor and then put together a practical budget for your project. This budget will need to be presented to the project owner, aka your boss or maybe even someone higher up than that, for approval. Be sure it is comprehensive. Your boss will want to know just how feasible the project is when he or she presents it to the board for approval. That budget will also be what the finance team will use to obtain financing for the project. If the budget indicates that the project location needs to be moved or that something needs to be scaled back, now is the time to make those changes.

2. Your boss or the board of directors might have one vision of what they want to see, but it might not actually be practicable. The project owner should be a part of the planning process so he or she is comfortable with the changes that are made. Also, while you are in the planning process, be sure you bring in all of the residents including those who will be using the building when it's all complete.

3. Once you have the plan in place, it's time to set up the schedule. If your project owner wants a specific date to open the building included, that should be the place to start and then work the schedule back from that date. Be sure to build in a buffer along the way to compensate for any delays that might happen. Actually, make that will happen. The unexpected is always to be expected. With a schedule in place, your general contractor can keep you appraised of the progress, and also let you know about any delays that were encountered.

4. Don't be afraid to work within your own limitations. It's OK to admit what you don't know, and when it comes to construction, relying on your experts to guide you is not only okay, but a good idea. Your contractor will also know what will be needed in terms of how to best keep you up to date on the project's progress.

5. Communicate, communicate, communicate. There is no such thing as too much communication. Your contractor will need to provide you with regular updates, and you will need to ask key questions to make sure you and your contractor are staying on task. Open communication reduces problems and generally catches them at a point where they are more easily solved. New apps available particularly for Apple products are great communication resources. From the bid process with SmartBidNet to portable CAD apps that let you do quick drawings on site and send them to anyone by e-mail, apps can help everyone stay on target.

These five tips are some of the main ones that will help you be successful. You can also check out some of our other posts for more information about commercial construction. Happy building!

10 Great Commercial Construction Tips

Commercial construction can be a big undertaking, both literally and figuratively. You might think you have it all under control, but do you really? Here are ten tips that will help make your next commercial construction project a success.

1. The lowest bid is not always your best choice. It’s a counter-intuitive thought compared to everything we have been taught. But even in these times of wanting to be sure to keep the bottom line in check, it’s important to find the best price for the project. Sometimes the low bid is that way because the contractor has no idea what the job entails, and other times they will come in low, get a payment or two, and then abandon the job.

2. Go online and do your research. Check references, run the contractor’s board numbers, and study the backgrounds of your contractors so you can know before you sign on the dotted line just what you are getting. The internet can also be a source of information about current trends in commercial construction.

3. Find a contractor who specializes in what you want done. Sometimes the biggest isn’t always the best. A smaller contractor who is more adept at smaller jobs might be just the right thing your job needs. If you are revamping a store, consider finding contractors who specialize in retail space renovations.

4. Start with the general contractor and build from there. By bringing the general contractor into the job first, you are able to use their knowledge on the job from the beginning and have them help guide the project.

5. Go ahead and add on that maintenance agreement. Once the job is done, you want to ensure that your project will last for years to come. A good maintenance contract that checks over the equipment is a great idea to clean and maintain things like your furnace or drain pipes. A quick cleaning now is much cheaper than an expensive repair later.

6. Does the goal of the project further your company’s image and brand? If it doesn’t, it might not be the right project for you. This is a big capital expense, and you want it to pay off with a solid return on investment for you.

7. Your project should make sense. Do you have custodial closet doors that open inwardly? Did the customer service booth end up with only a small front-facing window? Double check the design proposal before you go out to bid to ensure that the concept diagrams and blueprints make sense and lead to positive workflow.

8. Along with number 7 goes ensuring that the areas like the office supplies and the copier are easy to get to and are going to keep things efficient in the office or administrative area.

9. Decorate in such a way that the colors and furniture enhance your brand and your company’s image. Your customers should feel like they are welcome in your new place, so be sure your contractor includes an interior decorator in the plans.

10. Be sure your contractors are all on board with the project and are capable of meeting the deadlines. This point is probably the most important one of all. Any delays are costly both financially and in terms of getting your business going again in the new location.

Hopefully these tips will help get you going in the right direction for your next project. Happy building!