People have different reasons for wanting to get something built. Usually, there is a disconnect between what they want to build and what they can afford to build.
Recently a friend was working on a project for a non-profit, where the design committee had stated that the project budget was 20 million dollars.
The project was well into designs and the design team had put together a beautiful looking project. The cost of construction was estimated to be about 18.3 million dollars, all in. The team felt great! They had successfully designed a beautiful looking project well within budget, or so they thought.
Then, literally an hour before the team went to present the project to the city board, the donor told the team the donation would be five million, not the budgeted amount.
They asked me to help figure out how they could get the entire project down to five million, so we spent the weekend crunching numbers and whittling away at the project.
That following Monday, we presented the list of suggested cuts which included reducing the square footage of buildings, reducing ceiling heights, re-positioning buildings, combining spaces, and using different materials. It was all budget driven, but the owner was still not at all happy with all the suggested cuts.
Realistically, the owner can get all of the necessary project functions into a project that will cost five million, but taking any project from 18 million down to 5 million, will drastically change the project size, scope, and quality. In the end, it may have changed everything so much that they don’t build anything resembling what they wanted.
The worst part is that now they have a design that they cannot use, have purchased land they may not use, and have spent upwards of one million dollars on everything to date.
In every project, it is of utmost importance that the people responsible for design and those responsible for funding, are on the same page.
In this case, the design committee never wanted to have the donor involved or informed, and had no other relevant donors. They were setting themselves up for a failure and didnât even know it.
It didn’t have to happen that way. If the design committee really wanted to build something useful, they needed to compromise on the project size, scope and quality. If they couldn’t, they will have wasted a million dollars on a plan they cannot afford to build on property they cannot use.
Often, investors tell you that, “In real estate investing you make all your money by buying right!”
The truth is, “Buying Right” is only part of the ‘flipper equation’.
Most property flips need repairs and upgrades as part of working the flip. Even when holding property, eventually repair and maintenance is needed. This makes property flips, a three-step process: Buy, Renovate, and Sell.
If you buy wrong it’s hard – some say impossible – to turn the situation around. There is no question; flipping property starts with the buy. People have a great degree of control over the buy if they are objective and willing to walk away from the deal. The “trick” is to have solid information that makes you confident you are buying right.
The same information helps your reasonably predict, but cannot control, the sell. Selling is always subject to market changes.
You can buy right only to see the profit slip away when the renovation goes over budget, takes too long, or both. It’s easy to understand why going over budget can reduce profit, but a project is on budget, but takes too long and the market changes – taking a dive mid project. That’s what happened to thousands of flippers when the housing bubble burst in 2008.
Each of those conditions are enough to lose some or all of your profit. Both together, will have you deciding between holding and renting in hopes of the market eventually turning around, selling at a loss, or foreclosure.
That’s why controlling the renovation, is the best way to maximize profit. With the right construction management system and tools in place, you can keep competition fair and reasonable, clearly outline expectations, hold people accountable, control costs, maintain a healthy power structure, and provide checks and balances.
And with unbiased and objective support in place, you can easily sort out confusing and / or conflicting information.
With these two things, you can keep your residential and light commercial project on track, profitable and headache free.
The term FF&E is an acronym for Furniture, Fixtures, and Equipment.
Furniture is movable items such as tables and chairs. Fixtures are the immovable items such as cabinets. Equipment is a machine such as a water-heater or air conditioner. All are used to make a house or other space suitable for living and/or working.
Materials and Finishes, are generally talked about in one of two ways; products and construction materials. Every product you choose while developing your project plan will be made of a specific material with specific finish options.
People sometimes use the terms Material and Finish, interchangeably, but they are not the same thing. Material is what a raw component is actually made of, while the term Finish describes the sheen, color, and texture.
For example, people often talk about paint as if it is a finish, which it is, but only in the context of being applied to another product, like drywall (sheet rock). However, nowadays the paint itself comes in countless finish combinations when considering available colors, texture additives (like popcorn), and sheen such as gloss, semi-gloss and flat.
Manufacturers differentiate their product lines by generally providing better materials, finishes and options in higher priced products.
The same is true in construction. The qualities of products on the market today generally fit into many different categories: Economy, Basic, Common, Deluxe, Luxury, and Custom â or other similar words. Companies can use different words to describe the same quality level, even among manufacturers of similar products.
There are incalculable combinations of Material, Finish and product combinations. There are so many, there is no way to cover all of them, but donât let that overwhelm you.
Construction Conductor explains how you can use that to your advantage in Who Selects What.
Before sending out your bid package, talk to multiple companies to get more information about each.
Give each contractor a quick call to conducting a short phone interview as you connect, or you can choose to include a questionnaire as part of a simple interview process. Itâs up to you, as it is truly a matter of comfort. If you have a lot or contractors to talk to it is easier to compile the interview questions into a single document that you can ask all of the prospective bidders to fill out and return, than it is to spend a lot of time talking on the phone to each one.
Get to know each contactor by asking them some questions. Here is a list of question that you should ask in order to decide if you want to send a contractor your bid package:
You want to know how much experience the contractor has.
0 â 3 years can mean the contractor is really new to the profession.
4 â 6 years and they should have some good experience under their belt, but there are still a lot conditions they have never encountered.
7 â 10 years; most conditions are old hat and something new is usually nothing to worry about.
+ 10 years and they are well seasoned and have seen just about everything there is to see.
You want to get an understanding of how skilled the contractor is beyond the existing business. More years of experience in more parts of the construction industry means the more they will recognize each aspect of the job and better respect for the needs of other trades.
You want to know how much of the work the contractor expects to handle with their own crew. The more work they do themselves the more they have control over the quality of work activities. The more they outsource, the more opportunity there is for miscommunication and poor coordination.
You want to know how âinvolvedâ the contractor intends to be in the actual labor. Are they handling the transitions? If so, they may be better able to actually see if there are quality problems. Are they outsourcing or subcontracting out most or all the trades on your project? If so, they may not be watching closely enough to spot potential problems.
You want to know how financially solid the contractor is. Do they have the resources to mobilize and start construction, or âdo they need a deposit to get startedâ or âto buy materialsâ? If they can get going without an âupfrontâ payment then they are more financially solid than if they need a deposit. I seldom recommend giving the contractor a deposit, but even I do acknowledge that there are times when doing so can be helpful.
You want to get a feel for how much attention the contractor can give your project. The fewer their staff and the more projects theyâre working on, the more you should be concerned they canât focus long enough to quickly knock out your job.
You want to know if this company is organized. The more organized the contractor is, the less youâll have to worry about. It doesnât mean you wonât have to worry about anything; youâll still need to inspect your project. The more disorganized the contractor the more likely for there to be problems, delays and the higher the price tag.
Here is where you just flat out ask them about their production ability and if they could handle your job IF you select them. You want to see if their time frame fits with your planned schedule. Plus, if you select them this gives you some good contractual start and finish dates that the contractor has voluntarily given you.
Of course you always want to check up on their work. So asking for references should go without saying, still it is important to ask, so we include it on the list.
It may seem funny, but I find that this is a useful question to ask. Occasionally youâll find a contractor that actually doesnât want to give you a bid. When you meet that contractor, they will usually let you know right away. It happens for various reasons which weâll have to cover in another article. The point is that if they do not want to bid the project, donât take it personally. Be grateful that you know right away. That way you can just move on and you donât have to spend any time chasing them for a bid you were never going to get.
Of course, if the contractor in question is not even listed with the Better Business Bureau, then you donât even need to worry about asking this question. However, if you checked and you find that a contractor has a bad review or bad rating, ask them about it. Anyone can have that bad experience that follows them for far longer than theyâd like and contractors are no different. Maybe the company was victim of a psychopathic ex-employee, an unusually difficult situation, or maybe the bad rep is for a very good reason. You wonât know if you donât ask.
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 projectâs finances and even deal with the building inspectors. âIt shouldn’t be all that hard,â they say to themselves, âwhy pay for services I donât need?â
Okay, thatâs 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. Thereâs 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 doesnât 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 projectâs 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 thereâs 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 isnât 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 thereâs the need for regular inspections and reports of the projectâs 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 donât check it? How can you know if the right size plumbing pipe is used without measuring it yourself? You canât count on the contractors doing what you say, without checking their work.
Thereâs a great management saying, which applies very much to construction, âPeople do what you inspect, not what you expect.â 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 isnât the norm. If you had the architect specify 4â drain pipes for your toilets, and the plumbing contractor is used to using 3â drain pipes, he might very well put in 3â, even though you are expecting 4â. Unless you inspect his work, youâll 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 donât do so, you are asking for trouble.
The real question isnât whether or not you can manage your own construction project; itâs whether or not you have a system that helps you organize the time to do so. If you canât dedicate a couple of hours per day to managing the project, you donât have enough time. You wonât end up happy with the results, because your contractors will misunderstand you at every turn. Your project wonât be successful, but rather, be a series of ongoing problems for you.
Thatâs 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.
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