A Lesson of Planning a Construction Project – My personal shared experience.

I know how to run a project. I have managed large scale projects, smaller complicated projects, and many in between. I have also helped many organizations avoid the risks that go along with projects and I have helped to get them out of trouble when they faced those risks. So, a simple remodeling project in my home should not have been an issue to keep on track, right? I mean, this is what I do for a living.

My wife and I have been remodeling our master bathroom. I am a pretty handy guy and would love to believe that I could have tackled this project myself, but between two young sons and countless other obstacles, the cards were not in my favor to do it. So, I did what a lot of people do when they have a project and do not have the time or capability of taking it on themselves; I hired a contractor.

I knew I could keep the project under control since remember, I know how to run a project.

After about a year of saving money, we were finally ready to get someone who could do the work. We found a great contractor named Mark, who was qualified to do the project and get us the bathroom we wanted. We had a slightly unique project in that some of the bathroom was already framed out from the previous home owner. Therefore, Mark gave us an hourly rate for his labor and would charge us the actual cost of material. He could estimate his hours, but the material cost depended on what we ultimately picked as our finishes. He gave us a ball park estimate which helped us to set our budget.

As someone who considers themselves an expert in project controls and construction accounting, managing a bathroom remodel project should not be a problem. However, I quickly learned that just like the projects I get involved in as a Consultant, my simple project still had the potential to get out of control. I was not going to let that happen though…...because I know how to run a project.

There are several potential pitfalls that have a chance to derail any size project, from a small remodel project to a large capital improvement project. As a construction auditor and trusted advisor for my clients, here are a few potential pitfalls that I have experienced that can send a project spiraling out of control. I was sure I could avoid these however, as I have seen these affect projects before and am experienced enough to not let that happen to me.……or so I thought.

Pitfall #1 Budgeting:

There are many reasons why people decide to “construct” a project. Maybe there is an immediate need to expand manufacturing or production space. Perhaps a current facility has reached the end of its useful life and is costing more in maintaining than constructing something new.

Whatever the reason, a realistic budget should be based on both the actual needs and wants of the project. Creating an arbitrary budget that is not well thought out just to get a project started certainly lends to the potential of that project going way over budget. In our case, we set our budget based on what we could save in one year. We had no idea if that budget was reasonable in comparison to the bathroom that we really wanted. Perhaps the approach we should have taken was to have the bathroom we wanted designed and priced, and then decided if that bathroom fit our budget.

Realistically, any bathroom only needs a few major components to be functional. A shower, toilet, vanity, some fixtures, etc., but we did not simply want something functional, we wanted something more.

One of the major challenges that any owner faces when they want to build is creating something that achieves both the functional, as well as the desired aspect of what they are planning. In our case, once we determined the things that we really wanted that were above and beyond the actual functionality of the bathroom, we should have created a budget that matched those inclusions.

It may have been that the project budget exceeded what we saved in one year’s time. As a result, we may have needed to postpone the project until we could achieve the savings needed to start construction. Alternatively, it could have been that despite the project exceeding our budget, we had a desire to get the project started. In that case, we would have needed to redesign our project to match the budget that we did have. Perhaps in that scenario, we would have focused on the items that were critical and functional to the room and less on the items that met the wants of our projects.

While the latter scenario may be the better option, it seems that many owners do not consider redesigning a project to fit their budget. An organization may determine they need a project and more importantly, have a need to get the work started as soon as possible, even if they know the budget is not realistic. 

I have had owners say to me, “We knew the project was up against the budget from day one, we just thought we could cut costs as we were going.” There is no doubt that starting a project with this mentality will result in the project exceeding the budget.

I knew of these dangers and due to my experience, I was sure to avoid budget pitfalls, right?

Pitfall #2 Schedule:

What is your schedule based on? In the case of our project, we had another functioning bathroom, so from a scheduling perspective, we were not in a hurry to reach completion. However, I know that having that mentality can create various opportunities for risking the schedule and leading the project off track. 

We asked our contractor how long he thought the project would take. He told us he thought he could have it completed in five weeks. Five weeks later, we were still waiting for our bathroom to be finished.

Why is this? Of course, we could blame the contractor, which is what a lot of owners may say first. “He under estimated the time it would take him to do the job.” However, his estimate was based on starting the project and having all decisions made and materials procured on day one. From his perspective, the material he needed to finish the project in five weeks would be neatly stored in a “laydown” area. The reality of this is that while a project can have a detailed schedule that nails each task down to the hour, a lack of decision making on choosing a material, or a delay in the delivery of material can affect how realistic that schedule is. Without factoring those potential scenario’s into your project schedule, the schedule may not be realistic.

While the contractor should not be blamed for our lack of decision making, he does carry some of the responsibility of keeping the project on schedule. Often, on projects where a construction manager is involved, the expectation is that the “CM” will manage the project, including the competency and decision-making needs of the owner. Too often however, the CM does not want to upset the owner and therefore does not push for decisions to be made in order to keep the project on schedule. Later, when the project goes off track, the finger pointing of who is at fault begins.

A good CM will put as much thought into creating a realistic schedule, as they do in managing the delivery of that schedule. If that means pushing the owner to make decisions, then that is what needs to be done. Many owners may have heard the term “Critical Path,” but they may not understand or respect what is critical to the project to have an on-time delivery. If a CM is not managing the owner and their understanding of how decisions affect the project, they are not being an effective construction manager.  

In our case, my wife was curious why we needed to have sinks ordered and delivered before we picked out tile. Surely the tile would be installed way before the sinks? However, what was critical to the project was making sure the drains and rough-in fixtures were set before any tiling started.

Being the CM of our project as well as the decision makers, I was positive my experience would ensure us avoiding scheduling delays, or so I thought.

Pitfall #3 Contingency/Changes: We know changes can literally kill a project. As a bystander of this process, it is very easy to see how changes come about. Some are truly unforeseen conditions, while others are purely based on a “want” for the project. 

As I stated before, our bathroom project was started by the previous home owner. There was already plumbing behind some of the walls. Assumptions were made that things were done correctly. As it turns out, they were not. This caused additional work that was not anticipated by the contractor. However, having lived in the house for over a year, I knew the caliber of work done by the previous owner. Knowing the work was not always done properly, I made sure we set aside contingency funds in the budget to plan for the unknown and unexpected.

My firm is involved in a lot of projects where we review project budgets. Often, owners will put their budget together and use a standard percentage of “contingency” for the project unknowns. However, after speaking with an owner and asking them why they used that value for their contingency, they do not have a good answer. I have heard, “That seems to be the standard” or “That is what we used in the past” or worse yet, “That’s what our contractor suggested.” If an project owner has more intimate knowledge of a project or a particular site, perhaps the standard contingency value that has always been used is not enough to cover the potential unknowns of a project. It is just as important to put thought into allocating money for the unknown as it is for the known.

Using the “industry standard” for contingency may be sufficient on a site that has never been touched or developed, but, if you are building a project on a former steel mill site, perhaps the “standard” contingency allocation does not work anymore. Changes happen, but how one prepares for them is what can make or break a project’s performance.

Then there are the true changes that are derived from a “want.” It is easy to see how those items come about on a project as well. It is not fair to blame only the contractor or only the owner. In most cases both parties have a desire to make the project perfect. As a result, the contractor may make suggestions they believe would be better for the project. Those suggestions, may in fact be great ideas or produce a desired result, but at what cost? 

In many situations owners get themselves in trouble by having an idea presented to them and not asking the question, “How much will that cost?” and the follow up question, “What all is included in that cost?” It is easy to see how a simple suggestion or idea can cause the costs to escalate and continue to rise as the project continues.

As an example, our bathroom project began with the idea that the only heating component would be the existing single vent already in the room. As the tile floor began to be laid, we decided that the room felt cold and we really “wanted” it to feel warmer. Our options at that point were to tear out the tile and put down a radiant floor mat, live with the cold tile, or explore a different solution. We ultimately decided to run an electrical line for some baseboard heat. This certainly had a cost impact since we decided to do it after the fact. Had we decided that we wanted additional heat before tiling started, the added cost of the radiant mat may have been a change to our project, but it may have been minimal. Essentially it may have only cost us the expense of the mat itself, and a small portion for labor to install. The tiling process would have remained the same. Our decision would then need to be based on whether that change cost was something that we were willing to spend on something we truly wanted.

Instead, after factoring in the labor to tear out the floor that had already been installed, labor to install the mat, the mat material, and the labor to relay the tile, along with the loss in material cost of the tile, the cost was astronomical. In the end, the baseboard heater is not really what we wanted, but what we needed to live with for not making decisions early in the process. Despite my experience, I still fell trap into some pitfalls.

CONCLUSION

The moral of this story is that it does not matter how large or small a project may seem; all projects follow a similar sequence. A project is contemplated, a budget is established, a scope of work is developed, a contractor is assigned, a schedule is set, and work begins. If any of the steps before actual construction starts are not considered with the proper amount of diligence, it is easy to see how a project can be at risk for going off track. The same obstacles and risks that exist on very large projects may often be worse on smaller projects. Especially when a smaller project may not have gone through all the proper planning and decision-making steps needed to keep it from going over budget or over schedule. 

Fortunately for me……I know how to run a project.

Antonio Fratangelo is the Vice President of JA Cost Engineers and Advisors. JACEA is an Advisory firm helping construction owner and contractors avoid risk on the risky endeavor of construction.

He frequently speaks at conferences for the National Association of Construction Auditors (NACA) and Association for the Advancement of Cost Engineers International

He can be contact at [email protected]

He can be followed on Twitter at @Fratangelo_A

See my other articles:

Why We All are Speaking Different Contract Languages

https://www.dhirubhai.net/pulse/why-we-all-speaking-different-contract-languages-fratangelo-cce-cca/

And articles from the Principles at my firm

Answers from the Construction Auditor to the Contractor:

https://www.dhirubhai.net/pulse/answers-from-construction-auditor-contractor-ortego-pe-cce-cca/

Defining Roles in Your Project:

https://www.letsfixconstruction.com/blog/defining-roles-in-your-project

Technology Ruining AEC?

https://www.letsfixconstruction.com/blog/technology-is-ruining-aec