July 18, 2019
Whether you're searching for a recipe to bake a cake, preparing for the big game or researching a big purchase, you need a good plan. Unfortunately, many builders pay lip service to that concept, preferring to fly by the seat of their pants to appear flexible to clients. In a commercial real estate market as competitive and saturated as Austin’s, we must demand accurate and transparent pre-construction services.
Anyone who’s been part of a construction job will attest that anything can and will happen during the course of the project, but that doesn’t mean you should avoid planning. You need a firm foundation for your development if you want to experience any sort of success. The problem becomes assessing how you plan, because all plans aren't created equal.
In the past, traditional pre-construction often took this form:
With this format, the budget is created in a vacuum, operations exist in silos, and implementation occurs with limited oversight by a single controller. Since communication can break down across silos, projects can go over-budget. In response, the project team engages in “value engineering,”, which often means reducing scope, cutting programs, and utilizing lower-tier materials to control escalating costs.
Such cuts typically go against the client’s initial expectations and goals for the project. Unfortunately, if value engineering is introduced late in the construction process, it often leads to delays in the construction schedule and increased costs to re-work the design. And it’s all because the project started going over budget because of improper planning before the build began.
Luckily, there is a better way.
When you engage in effective pre-construction procedures, your project will dig deep into the details from the get-go to develop that crucial big-picture view. The process follows this model:
As you might imagine, transparency and open communication are indispensable to this methodology, but the results are undeniable. Removing the silos puts the budget and scope are up-front for everyone to see. This helps the stakeholders gain a true understanding of the costs.
No matter how perfect everything appeared during those planning meetings, things will happen. They always do! That’s the difference with a comprehensive pre-construction plan. First, it understands that construction projects are often fraught with scheduling changes from forces outside of the original plan. Then, it factors in the potential for those changes with as much clarity as possible.
This sort of budgeting can feel relative and nebulous since no general contractor has access to the Master Costs Database. If no one has all the right answers all the time, can anything really get done?
Hence, you should regard pre-construction budgeting as an art form, not an exact science. By assuming up-front that unforeseen circumstances can and will occur, you can better build acceptable levels of variance in your budget. A pre-construction plan accomplishes this by codifying and planning around the truest needs for your project – as opposed to just your “wants.”
You must develop a well-defined understanding of the budget, processes, and potential overruns of your project. The health of the overall real estate industry and the quality of your buildings depend upon it. This is especially true with Austin being such a “landlord’s market” at the moment. Since rents aren’t coming down and rental inventories remain low, you must control your costs in other ways.
When you invest in pre-construction services for your next real estate project, you affirm that transparency and precision are essential to your work. Moreover, you display your commitment to the sort of thoughtful, intentional planning designed to minimize work stoppages that can destroy project budgets.
A few final pre-construction tips:
Successful pre-construction goes beyond mere planning and budgeting. It helps you pay attention to both the forest and the trees with concentrated, holistic intent. This way, you can deliver the best possible building for your investors, your business, and your future tenants.
This month's blog presented by: