How to Speed Up Commercial Construction

After an unfortunate slumping period in new commercial construction projects, we are happy to report that new development projects are in full recovery mode. This trend has been pointed out through a series of leading indicators including deliveries of new building supplies throughout 2014.Another indication of a growth spurt in the commercial construction industry is found in the Architecture Billings Index (ABI) which comes out on a monthly basis. In the ABI there was a sharp three point jump in May of 2014, as compared with the previous month. Thus, the need to speed up the process of commercial construction has become even more crucial.

“In commercial and residential construction, cost-effectiveness, speed and safety count and functionality dominate over prestige.” This is an excellent and pertinent quote. While factors like cost-effectiveness and speed definitely do count in the world of commercial construction; SAFETY CAN NEVER BE SACRIFICED!! Safety is the number one concern in all commercial (and residential) building projects. In this article we will look at how to speed up the commercial construction process WITHOUT sacrificing safety.

The often complex world of commercial construction is ever-increasing in demand. The range of projects vary from office complexes to shopping malls to factories to luxury hotels. Technically; although there ARE differences, commercial construction projects can also be housing developments or apartment complexes. Typically budgets are tight and the time-frames within which a commercial project can be completed are fairly narrow. Therefore speed definitely counts. An excellent construction company CAN deliver primo results under such conditions. The finished product is often visually gorgeous and is completed within the necessary time-frame and safety IS NOT SACRIFICED!! It pays to hire a reputable company for such a project.

“New Formwork and Scaffolding Supplier on the UAE Market Innovation made in Germany now at home in Dubai.” MEVA Formwork Systems is based in Germany and now boasts that it is the most prolific supplier of Scaffolding (& Formwork) equipment in the Middle Eastern countries. This equipment is essential to the process of speeding up commercial construction projects because it allows workers to complete projects without the use of cranes. In fact; most frequently, the cranes cannot even be used for these types of projects because they are too large to fit in the allotted space. What was once an inaccessible area for these construction workers, the same workers are now able to complete their projects with the use of this MEVA equipment. They can personally assure that all processes of their specific project are completed with SAFETY in mind. Not only for the safety of the building’s future tenants; but also the safety of the workers who are assigned to that specific project. These are of huge benefit to the industry.

Much more information about MEVA (and possibly products by similar competing companies) is available on the Internet. Just go to your favorite search engine and type in the heading name. Not only is there more information specifically about MEVA, there is info and news about other techniques used to speed up commercial construction projects without sacrificing anybody’s safety.

Commercial Construction – How to Breakdown the Costs

The first thing to do when breaking down the costs of commercial construction is to find out everything you can about this specific project and its geographical location. You must know exactly what kind of a building it will be and what types of businesses will occupy it. Next you must know everything you possibly can about the location it will be in. What kind of architecture is prevalent there? What is the weather like? The answers to this question are important because you must ensure your project will safely accommodate any type of people that will frequent it. You should also be familiar with any local ordinances that may dictate what kind of structure it can be. Once you have the answers to these questions you can estimate the different costs that will be involved in constructing it. What are those individual costs? We will now take a look at them.

The key factor here is the cost per square foot. In determining this it is a good idea to have an understanding of the community this project will be in. That is because; in order to figure out YOUR budgeted costs per square foot, you should know how much will be charged to each tenant once the project is complete. In other words, you need to know how much of a profit you will get back in return upon its completion. There are research sources you can access on the Internet that will give you an estimate of the square footage involved in constructing various types of projects, as well as by the different regions of the world. The data provided by these websites is quite extensive and will be of much assistance to you.

The next factor we will examine is the cost of the construction materials for your pending project. This is another thing that will vary greatly; depending on who you purchase your supplies from and once again, where they are physically located. The type of materials you intend to use for your building will also help determine your costs. The costs of a building made from concrete will differ from those of one built from steel. If you have a lot of glass or marble or other more elaborate materials on the outside, the costs of those will enter into your bottom-line. What about the surrounding grounds of this building? Will it contain more grass and trees or bushes? Will it feature rocks and stones of differing sizes and types? Will you have any water features like a fountain, small lake or pond or anything like that? All of these things you intend to include in the construction of your commercial project will surely enter into your costs.

Another thing that will contribute to your costs is whether or not there are structures already located where you wish to build. If there are, there most likely will be the cost of demolishing the other structures. After all, that sort of an activity will not be done for free. You may need to pay for that up front, include those costs when it comes time to earn your money back once construction is complete. There may also be permit costs and other legal fees associated with eliminating other buildings. You must consider these as well.

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.

How the Recession Is Affecting the Commercial Construction Industry

The ‘Great Recession’ theoretically lasted about 18 months, from 2007 to 2009. Recovery has been agonizingly slow in many industries but we are now in 2015 and the construction industry is more rapidly shrugging off the residual effects of the recession.

How Bad Was It?

Even though construction industry is cyclical and recession typically follows a boom period, nothing could have prepared it for the harsh and widespread reach of the recession:

  • Residential: Homeowners defaulted on homes and others delayed buying homes, leading to a glut of residential real estate languishing in realtors’ inventory.
  • Commercial: Commercial construction also was hard hit, severely impacted by the federal budget sequester and eventual-but-temporary shutdown, followed by scaled back government spending, and sharply reduced lending practices.
  • Institutional: Institutional construction remained stagnant, affected by the same limitations and funding problems that the commercial construction sector faced.

How Were Construction Workers Affected?

Nevada, California, Florida, and Arizona are typically areas with plenty of construction work. But the recession changed that:

  • Nevada employed an estimated 146,000 construction workers at the peak of its construction boom. That number was reduced by 59 percent.
  • Arizona’s construction employment dropped 50 percent from its pre-recession industry peak.
  • Florida was close on the industry-related unemployment heels of Nevada and Arizona, losing 40 percent of its construction workforce.
  • California fared better but still recorded a 28 percent drop.
  • According to the U.S. Bureau of Labor Statistics (BLS), approximately 2.3 million construction workers lost their jobs in the recession (nearly 30 percent of the total number of lost jobs).
  • The overall construction industry has an estimated 1.4 million fewer construction workers in 2015 than it did in 2007.

The Construction Outlook in 2015 and Beyond

Happily, the U.S. and its construction industry continue to move away from the harshest effects of the Great Recession. Industry observers expect to see these improvements:

  • Non-residential construction: picking up and looking more solid, especially with the expected 2.6 percent real GDP growth in 2015. This sector may rise by 8 percent with growth in office buildings, hotels, and industrial facilities.
  • Single family housing: expected to increase by 11 percent in the number of residential units, thanks to easier access to home mortgage loans.
  • Manufacturing plant construction: will probably drop about 16 percent after huge increases of 2013 and 2014.
  • Institutional construction: expected to continue its moderate upward trend and increase 9% over 2014 results.
  • Residential construction: called the potential ‘wild card’ of 2015 because of rising interest rates. Existing home sales may climb toward 10 percent.
  • Public construction: growth will remain low due to ongoing federal spending constraints. However, transportation spending is expected to grow by about 2.2 percent.

Ironically, construction workers may not be rushing to return to new jobs. Many left the industry altogether, retraining for other employment.

Texas and North Dakota both show significant increases in construction employment. North Dakota now needs to recruit construction workers. Texas’ construction employment is up 10 percent, nearing its pre-recession peak.

Economists don’t expect the construction industry to return to its peak level (2006) until 2022 or later. However, the BLS anticipates that the fastest-growing jobs now and 2022 will be in healthcare and construction.

So while the Great Recession did a considerable amount of damage to the overall economy, individual incomes, and morale, 2015 and beyond are looking considerably more favorable in the commercial construction industry.

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 fulfil 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.