Working with your design/build team to manage risk to the schedule and budget during the construction process.
By Evan Williams
There are many inflection points during a project development that can impact the project schedule or budget. Budget risks can develop from early phase design and due diligence gaps to drawing document issues, to owner changes, changes required by the local governing authority, to material cost escalation, and other issues that arise during construction. The schedule can be impacted by longer than anticipated design phase timelines, permitting delays, owner decision delays or changes, and General Contractor and sub-contractor issues. Only through a dedicated and consistent focus on controlling these risks can the project remain on schedule and meet the budget.
Budget Risks by Phase
Early in the project development, it is critical to involve the entire project team to confirm the project scope aligns with the owner’s needs. This can be straightforward, but typically involves weighing several options depending on cost and time to develop. By involving a construction team in the design scoping or preliminary design phase, the owner and design teams benefit from their practical experience to help determine costs as well as constructability reviews.
In addition, the design/build teams perform the due diligence with the owner. This task involves working through all the site and development related items. This involves a detailed survey and geotechnical exploration of the site. This confirms the sites appropriateness for the planned improvements and can also identify onsite risks like unsuitable soils, groundwater, buried waste, as well as utility and access easements, setbacks and other lot encumbrances that can impact the areas on your site that you can use. At this time, the owner and the design teams should engage with the local jurisdiction to confirm zoning and permitting processes and requirements. Often, on solid waste projects, conditional use or similar zoning procedures may be required that can have long timelines before permission to commence construction can be secured. Doing this work up front ensures that it is addressed and included in the project scope and timeline.
When detailed design development starts, there should be regular meetings involving all the project partners (Design, Owner, Construction, etc.) to ensure the design aligns with what was agreed to in the scoping phase, as well as the project budget. Should issues or complications arise during this phase, the construction team will be key to help evaluate options to either increase the budget or identify modifications to offset the cost impacts. It is important that these evaluations occur during design development, as once the design is complete, the changes will be much more time-consuming to complete and will cost more to implement. Another budget risk during design development is related to drawing errors or missing scope. This can happen due to a miscommunication between the drawing disciplines (Architecture, Engineering, Etc.), an error in the drafting or a miss in interpreting the project scoping documents. Regardless of the source, these can be addressed during design development or bidding through detailed drawing reviews by the construction team and the owner. While no drawing set is perfect, by involving as many project partners as possible in their review and evaluation, many issues can be identified and fixed before they have a major cost impact.
Change is a constant in life and developing a new project is no different. It is how we deal with those changes that define whether they will be a problem to the project budget or not. It is normal for the owner, as the project design evolves, to identify potential changes to the agreed-upon scope. Often, an owner’s needs change during design and construction or they may realize changes are needed once construction is underway. Regardless, the project team needs to address these changes as quickly as possible to define the change and identify the cost impacts as well as propose potential strategies to offset that cost. This is especially critical during construction, as the added time that may be needed to implement the changes can have significant costs if portions of the already-constructed building need to be removed or the project schedule needs to be extended.
One area where project costs can increase is related to costs involving requirements from the local governing authority. These vary widely and can typically be identified and defined during the scoping and due diligence phases. These costs typically involve accelerated review fees, permit costs, development and infrastructure fees. In addition, during permit or zoning reviews, some jurisdictions require certain public improvements be paid for by the project owner. We have encountered cities that required project owners to improve public streets, install public bus stops and shelters, as well as making offsite improvements on adjacent properties for stormwater purposes. Regardless of their source, it is important to identify these as early in the project as possible for several reasons. When these are identified, they can be included in the project design. This avoids design delays to add them during the permitting process. This also allows those improvements to be included in the project budget earlier. Try to schedule meetings with the local permitting, zoning, public works, and related agencies to best identify these items and their costs to avoid surprises later in the project.
Material Cost Escalation
This item is especially impactful in 2021, as lumber, steel and other items are experiencing notable cost jumps. The best way to control material cost escalation is to stay aggressively on schedule and lock in materials as early as possible in the project timeline. Many owners will delay projects for several months to accommodate operational requirements, delay capital outlays or for other reasons. The risk to the project budget should be discussed at that time to best inform the owner of the potential cost impacts that they could face if they push out the project schedule. This is also why proper due diligence is essential upfront to minimize permitting schedule delays, which can open the project to material escalation costs. If it looks like the project may be delayed, the construction team should be involved to project what the material escalations costs may be, as well as any other costs to allow the owner to factor that into their decision-making process.
There are many issues that can come up during construction that can have an adverse impact on the project budget. Depending on the method of project delivery (Design-Build, Design-Bid-Build, CMAR, etc.) the ownership of these costs can vary greatly. The methods of helping control or minimize those costs is similar across the project delivery methods. Should the issues be about construction quality, the team should evaluate whether this is a material or labor related problem and deal with it as swiftly as possible.
Delays in material delivery is another big issue during 2021 and the best way to minimize that impact is to order the materials as early in the project as possible. There are many things that can be procured during the design phase if the project is design/build and that will help to shorten the overall project schedule; lock-in costs to avoid increases and guarantee an on-time delivery.
Having a hands-on design team during the construction process will help to alleviate many construction issues because the team can work together to provide solutions before a problem exists. Choose your team wisely to help keep construction issues to a minimum.
Contractor and Sub-Contractor Issues
The contractors and sub-contractors on the project can make or break the schedule. The contractor must lay out short- and long-term tasks on the project look-ahead schedule and work with the sub-contractors to ensure that the work is progressing in the correct order and is in line with the schedule. Should certain critical path tasks take longer or be held up, the contractor must work to re-arrange tasks to stay on track. Ideally, by using a look-ahead schedule and having regular onsite meetings with subcontractors within the next month or two, issues can be identified and addressed before they can impact the overall project schedule.
A risk register is a good approach to help track and manage potential risks. Ideally, the risk register is a living document that spans the duration of the project and it should be started during the scoping phase. As items that present a risk to the project are identified, they should be added to the register. When entered into the register, it should include a description of the risk, the status, the date needed for resolution and potential resolutions. As updates for the risk item become available, they are added to the register, as well as the eventual resolution. This is a task best handled by the design/build team, as they can integrate it into the weekly project meetings. The idea is that the risk register presents a way where all identified project risks can be easily discussed by the group and tracked.
Identify the Best Solutions
Budget and schedule risks to your project are impossible to eliminate. The best way to address them is to identify them early and involve all the project partners to work to identify the best solutions. A collaborative design/build approach is the best way to manage risks. By working together as a cohesive project team, you can identify budget and schedule risks and work to minimize their impacts to the project. | WA
Evan Williams is a Design Project Manager at Cambridge Companies (Griffith, IN), a design-build firm working with the waste industry for more than 25 years. During this time, more than 150 solid waste design-build projects have been completed including new build, repairs, upgrades and/or modifications at transfer stations, recycling centers/MRFs, hauling companies, landfill facilities, office buildings and more. Cambridge continually monitors the industry to determine any new needs, changes or improvements that will benefit their
clients and improve their design-build solutions. Evan can be reached at (219) 972-1155, via e-mail at EvanWilliams@CambridgeCoInc.com or visit www.CambridgeCoInc.com.