Knowing what to anticipate - including the places costs typically "hide" - provides an edge for efficiently managing the construction process. A well-defined interview process will assist you in selecting the very best construction manager (CM) for the job. Be thorough; replacing the CM once the job has begun is costly and raises serious questions of liability. For renovation work, invite only CMs with considerable related experience. Interview previous clients to ascertain the CM's ability to deal with change orders, unforeseen elements and client decisions.
Insist that the project executive, project manager and project superintendent assigned to the job be present at the interview. (The executive represents the company, the manager spends the owner's money and the superintendent is the on-site contact.) Closely observe the interaction between these people. A successful project can hinge on the working relationship between them. Require all interviewing CMs to submit reveal account of what they heard and consented to at the interview. This important document will reflect the CM's understanding of your conditions and form the cornerstone for contract negotiations. This document will even serve to suppress potential disputes arising from construction contract issues.
Where costs hide The construction contract between the master and CM is a legally binding contract but its terms are not universal. The master should negotiate the specifics of the contract requirements and the particular needs of the project. The more knowledgeable the master - often represented by the facility executive - is about the type of the terms of the contract, the higher the awareness of the prospect of hidden costs. Uninformed owners can unwittingly agree to cover more income for a lengthier period of time than necessary. Demonstrate your understanding of the construction process by first knowing the machine prices and labor costs of every item you agree to purchase and negotiating the following standard construction contract line items.
General Conditions. General Conditions should only be those non-construction costs which are necessary to get the job done and are directly applicable to the project. All general conditions should be described as a line item amount consented to and guaranteed ahead of the start of construction. Typical aspects of general conditions include funds for a website office, on-site project administration labor and necessary office equipment. Do not accept an amount that is expressed as a portion of the cost. Substantial savings may be realized by asking the right questions about general conditions. For example, question the site office requirements presented by the CM, including simply how much new equipment is necessary. Who should assume the price of purchasing and installing the computer equipment and software the CM lists as a website office requirement?
Overhead. Overhead is the CM's cost of doing business. Should the master be responsible for that cost? An argument may be made that the master need only buy costs directly applicable to this specific project, and not for costs the CM incurs on other jobs toc meaning in construction. This line item specifically is often the subject of legal disputes. Do not forget to eliminate aspects of cost contained in this category and, again, don't accept an amount that is expressed as a portion of the work. Hourly Wages. Agree to cover only the wages for focus on your project. The actual hourly wages, taxes and benefits (not a multiple of these) would be the owner's responsibility. Time off and educational seminars are not. Avoid a scenario what your location is asked to cover wages for a general superintendent or some other part-time supervisory personnel.
Construction Fees. To ascertain a good construction fee, negotiate a portion based only on the price of the work. Be careful of the language of the contract. All fees are a direct percentage of the price of the task, ahead of the contingency and general conditions are added. A good 4 percent construction fee might be 4.5 percent if taken as a portion of a cumulative total. On multi-million dollar jobs, this will represent a substantial amount of money. Insist that the fee be converted from a portion to a fixed amount before construction starts. Once construction starts and the prospect of change orders (that can increase the price of the work) exists, the fee will continue to rise without limit. Don't enable the construction budget to be compromised in this way.
Contingency Fee. Most CMs require a contingency fee be built to the guaranteed maximum price. The only real responsible way to manage the mandatory contingency fee is always to insist so it be jointly controlled by the master and the CM. Neither the look nor the construction process is a perfect science; CMs will insist that they have to "manage their risk" with the contingency fee. Maintaining some control over the allocation of funds will enable the master to best justify the expenses. When negotiating the contract, the master must "choose the schedule" with the price of construction and guard against it slipping. Extending the construction phase is an expensive decision.
Agree on the completion date of the project and insist a penalty be levied if the project is delayed. Do not agree, however, to an advantage if the project is finished ahead of the scheduled delivery date. The CM might deserve an advantage for early delivery if extraordinary problems were overcome, but does not necessarily deserve bonus dollars for performing the job you hired them to do. Change orders and substitutions In negotiating the change order procedure in the construction contract, the master should demand a "no work stoppage" clause. Too much time may be wasted if work ceases in anticipation of a general agreement of change order amounts and schedule implications. When given an alteration order, the architect must look into both the cash and time the CM is looking to add to the job. Each is open for discussion. Don't wonder why construction isn't finished and then uncover the architect has authorized one more week of accumulated change orders.
As the CM should aggressively pursue reasonable substitutions on your behalf, make sure you or your architect knows the price of the originally specified product and the price of the alternative. The construction contract should state clearly that cost savings realized by the substitution for a specified product go straight to the owner. Here, too, substantial savings may be realized. As your architect's last part of control over the grade of the project, the punch list should be a comprehensive process. Accompany the architect to consider the job. Try to anticipate any problems that'll arise once the space is occupied. If a fault is discovered after the master has released the CM, the problem could be more difficult, frustrating, and expensive to remedy.
