Controlling Construction Costs: Best Industry Practices and How to Deal with Changes in the Middle of the Job

One of the biggest challenges facing construction projects is managing costs. With post-award contract changes and pending item notifications, construction costs can easily get out of hand. This situation can occur at any stage of the construction process, from pre-construction to the middle of the job, such as in the case of remodeling an old building and encountering structural issues that require expensive changes to the contract.

However, there are best industry practices that can be implemented during pre-construction to help avoid these situations. Some of these practices include:

1. Developing a comprehensive budget: A budget is the foundation of any construction project. It is important to develop a comprehensive budget that includes all costs associated with the project, including material costs, labor costs, and overhead costs.
2. Conducting a thorough site investigation: A thorough site investigation can help to identify any potential issues that may arise during the construction process. This includes issues related to the site, the building, and any existing infrastructure.
3. Engaging in early collaboration: Engaging in early collaboration with contractors and architects can help to identify any potential issues and find solutions before they become major problems.
4. Developing a comprehensive contract: A comprehensive contract should include clear terms and conditions, payment schedules, and scope of work. It should also include provisions for change orders and pending item notifications.

Despite these best practices, unexpected issues can still arise during the construction process that require changes to the contract and increase the overall cost of the project. When this occurs, it is important to take the following steps:

1. Review the contract: Review the contract to determine if the issue is covered under the existing terms and conditions. If it is not, it may be necessary to negotiate a change order.
2. Engage in open communication: Engage in open communication with the contractor and architect to determine the best course of action. This may include finding alternative solutions to the problem or negotiating a change order.
3. Hire a third-party professional: To help oversee contractor invoices and ensure that all expenses are legitimate and in accordance with the contract, it may be necessary to hire a third-party professional. This can include an independent auditor or accounting firm.
4. Stay organized: Keeping accurate records and maintaining organized files can help to ensure that all expenses are accounted for and can be easily reviewed if necessary.

In conclusion, managing construction costs is a challenge, but it is not impossible. By implementing best industry practices during pre-construction and engaging in open communication with contractors and architects during the construction process, unexpected issues can be addressed and solutions can be found. Additionally, hiring a third-party professional to oversee contractor invoices can help to ensure that all expenses are legitimate and in accordance with the contract. With these practices in place, construction projects can stay on budget and on schedule.

The Painting

The painting depicts a group of workers constructing a building, with some of the workers carrying building materials, while others are hammering and nailing wood planks. The painting represents the hard work, collaboration, and attention to detail required in the construction industry. It could symbolize the importance of following best industry practices and maintaining good communication with contractors and architects to ensure a successful and cost-effective construction project.

Golden Nuggets

1. Developing a comprehensive budget that includes all costs associated with the project, including material costs, labor costs, and overhead costs.
2. Conducting a thorough site investigation to identify any potential issues that may arise during the construction process.
3. Engaging in early collaboration with contractors and architects to identify any potential issues and find solutions before they become major problems.
4. Developing a comprehensive contract that includes clear terms and conditions, payment schedules, and scope of work. It should also include provisions for change orders and pending item notifications.
5. Reviewing the contract to determine if the issue is covered under the existing terms and conditions. If it is not, negotiating a change order.
6. Engaging in open communication with the contractor and architect to determine the best course of action, which may include finding alternative solutions to the problem or negotiating a change order.
7. Hiring a third-party professional, such as an independent auditor or accounting firm, to oversee contractor invoices and ensure that all expenses are legitimate and in accordance with the contract.
8. Keeping accurate records and maintaining organized files to ensure that all expenses are accounted for and can be easily reviewed if necessary.

These "golden nuggets" provide practical and actionable advice for managing construction costs, whether in pre-construction or in the middle of the job. By implementing these best industry practices, construction projects can stay on budget and on schedule, and unexpected issues can be addressed and solved efficiently.

How a Construction Project Management Executive can help

A construction project manager executive can play a crucial role in helping to control construction costs and ensure the success of a construction project. Here are some ways that a construction project manager executive can help:

1. Develop and implement a comprehensive project plan: The construction project manager executive can develop and implement a comprehensive project plan that includes all aspects of the project, including timelines, budgets, and resources. This can help to ensure that the project stays on track and within budget.
2. Oversee the construction process: The construction project manager executive can oversee the construction process, ensuring that all work is being done in accordance with the project plan and that any potential issues are addressed quickly.
3. Manage relationships with contractors and architects: The construction project manager executive can manage relationships with contractors and architects, ensuring that they are delivering quality work within the agreed-upon budget and timeline.
4. Identify potential cost-saving opportunities: The construction project manager executive can identify potential cost-saving opportunities, such as using alternative materials or construction methods, that can help to keep the project within budget.
5. Manage change orders and pending item notifications: The construction project manager executive can manage change orders and pending item notifications, ensuring that any changes to the project are made in accordance with the contract and do not negatively impact the project timeline or budget.

Overall, a construction project manager executive can provide the expertise and leadership needed to ensure the success of a construction project. By working closely with contractors, architects, and other stakeholders, they can help to control costs, manage risks, and ensure that the project is completed on time and within budget.

Industry Associations

Several industry associations develop guidance on controlling construction costs, including:

1. The Associated General Contractors of America (AGC)
2. The Construction Financial Management Association (CFMA)
3. The American Institute of Architects (AIA)
4. The National Society of Professional Engineers (NSPE)

These associations provide a range of resources and guidance to help construction professionals manage costs and ensure the success of construction projects. By following best industry practices and utilizing the guidance provided by these associations, construction professionals can minimize risks, control costs, and improve project outcomes.

Here are the best practices for controlling construction costs as outlined by four major societies and associations in the construction industry:

The Associated General Contractors of America (AGC):

• Developing a comprehensive pre-construction plan
• Conducting a thorough site investigation
• Establishing a realistic schedule and budget
• Engaging in early collaboration with contractors and architects
• Using building information modeling (BIM) and other technology to manage costs
• Utilizing value engineering to identify cost-saving opportunities
• Managing change orders and disputes efficiently
• Hiring qualified and experienced contractors

The Construction Financial Management Association (CFMA):

• Developing a comprehensive budget that includes all project costs
• Ensuring accurate and timely invoicing and payment
• Establishing effective project management and control systems
• Maintaining accurate and organized records
• Conducting regular financial reviews and analysis
• Implementing effective cost-saving measures
• Hiring qualified and experienced contractors

The American Institute of Architects (AIA):

• Developing a comprehensive project plan that includes all costs
• Establishing clear project objectives and goals
• Engaging in early collaboration with contractors and architects
• Developing a comprehensive contract that includes clear terms and conditions
• Managing change orders effectively
• Utilizing technology and other tools to manage costs
• Maintaining effective communication with all stakeholders

The National Society of Professional Engineers (NSPE):

• Conducting a thorough site investigation and risk assessment
• Developing a comprehensive project plan that includes all costs and contingencies
• Engaging in early collaboration with contractors and architects
• Developing a comprehensive contract that includes clear terms and conditions
• Managing change orders effectively
• Hiring qualified and experienced contractors
• Maintaining effective communication with all stakeholders
• Utilizing technology and other tools to manage costs

While these best practices provide a general overview, there may be additional best practices that are relevant to specific construction projects, and the best practices may overlap between the different societies and associations.

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