By Daniel O. Cook
From the June 2017 Issue
The pitfalls encountered during any construction project can be frustrating. More often than not, budgets run over and timelines go by the wayside. However, while overseeing a construction project can often feel like an uphill battle for facility owners and managers, there are opportunities throughout the project life cycle that can help cut costs and save time—all while preserving the quality of the final product. This begins with placing importance on the value of data, the procurement strategy, and software technology.
Value Of Data
With the accuracy of a budget in doubt, uncertainty and error abound. Mistakes early on lead to ripple effects that ultimately result in wasted time and costs.
Cost overruns represent one of the most serious risks during a construction project. While some unknowns are often unavoidable, many costly mistakes can, in fact, be circumvented. Cost overruns typically do not stem from one “mega” mistake. Rather these often grow from a series of minor errors early on during the planning and budgeting stages.
This is why there needs to be a check in point to ensure all parties can be confident in the work going forward. Having up-to-date, locally relevant cost estimating data can be that check and plays a substantial role in minimizing uncertainties and errors. The ideal cost estimating data accounts for materials and services based on market value, and also takes into consideration regional variants that influence local prices. Having team members on the same page helps to eliminate surprises, like hidden costs, or simple mistakes such as erroneously priced materials.
Research from PricewaterhouseCoopers has shown that a mere 2.5% of all projects are delivered on time and on budget. Once again, the planning and design stages offer opportunity to cut costs and condense timelines. Traditional construction procurement methods can be slow and inflexible. In turn, the origins of many cost overruns and time delays can be traced back to procurement of construction.
One alternative procurement method is Job Order Contracting. This method streamlines the bidding process by establishing local, competitively awarded contracts upfront, negating the need to bid each project separately. Since an indefinite number of projects have been competitively awarded through the contract, the door is open for future projects—dependent on the success of the initial project. Ultimately, this allows contractors to respond in a more promptly and efficiently and have projects underway much sooner than would be possible otherwise.
A recent study by Arizona State University’s Performance Based Studies Research Group researched Job Order Contracting over a period of 20 years. The study highlighted five benefits of this procurement method, and these are listed here.
Overall Satisfaction. Ninety-six percent of projects were completed with satisfactory results. And, 60% of owners were more satisfied with Job Order Contracting when compared to traditional procurement methods.
On-time Delivery. With Job Order Contracting, 87% of projects procured by this method were delivered on time.
Cost Savings. Owners reported an estimated 24% administrative cost savings, and contractors estimated a 21% overall cost savings.
Transparency. Job Order Contracting was shown to foster better relationships between owners and contractors with owners reporting transparency to be increased 30% during projects procured by this method.
Flexibility. Among owners, 76% found Job Order Contracting to be more flexible compared to other procurement methods. This flexibility also allows for decreases in cost overruns, because contractors are capable of reacting more quickly to situations that arise.
For the reasons above, 99% of the owners who used Job Order Contracting recommended the process to their peers.
Similarly, software technology offers opportunities in both collaboration and transparency, but in different ways than gleaned from good data and streamlined procurement. Software provides a platform to connect all phases of the building life cycle. It increases the visibility of actions to date as well as making sure everyone has an understanding of what is planned for the future.
Perspective is a key benefit of this technology. People working on small projects within a larger one have a better understanding of the big picture. This enhanced perspective can also allow team members to think creatively toward more efficient processes. People at different stages of a building life cycle who previously would not have interacted now have a stake in one another’s success. It is a kind of transparency that fosters connection.
Software is also the most efficient way to house cost data. The data is accessible to everyone, and when those numbers change, they change for all involved at the same time, eliminating miscommunications and misunderstandings. The real-time nature of software also eliminates back and forth that can cause schedule delays.
The construction industry is often slow to change, which is understandable due to the amount of money in play. The aforementioned practices can help to deliver significant savings on these significant investments.
Cook is the director, enterprise accounts at Gordian, a Greenville, SC-based provider of construction data, software, and services for the construction life cycle. He is responsible for ensuring the success of current customers, as well as informing them of products and solutions available to complement current solution sets.
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