Professionals Agree Cost Control Strategies Are Essential Tool
Controlling costs on a building project that can total millions of dollars by completion adds up to “real money,” say three building professionals who earn their reputations and their livings by making cost controls work. Thomas Berry, AIA, of Berry Facility Development in Durango, Colorado, Dennis Wallace, AIA, CSI, of Hammel Green and Abrahamson in Minneapolis, and Kenneth Bailey of Centrex Construction Group in Dallas, each practice a different approach to project delivery. They agree, nonetheless, that effective cost controls are an essential tool for anyone directing a building project.
In this article, we compare their cost control strategies to show how practitioners in the three major project delivery systems—design/build, construction management, and the traditional approach of architect/engineer in the lead—tackle this critical issue. It is an opportunity for designers, construction firms, and owners to learn more about techniques that have been successful and to examine their own blueprint for managing or controlling costs.
Required for Success
However dissimilar the three delivery methods are in their use of resources, the sequence of planning and estimating, or the delegation of responsibility, they all require effective cost controls to succeed. Berry, Wallace, and Bailey agree that to keep a project on budget and on time is only the beginning. Operative cost controls help architects, engineers, contractors, and owners:
- meet all functional objectives
- balance quality with expediency
- reduce risk and prevent claims
- enhance reputations
- stay in business.
Common Ground: Set Expectations Early, Review Often
These experienced professionals say it may sound obvious, but their first line of defense in controlling costs is to know what is being built and why. They describe “defining the project and setting expectations” as a serious first step toward making that project a success. “It comes down to communication,” says Berry, whose company specializes in design/build facilities for the health care industry. “Owners are not trained to build buildings and sometimes can't define what they want in realistic terms. It's our job to help them set expectations that move the project forward.”
Wallace, vice president and senior architect with an architectural and engineering firm that often takes the lead on projects, notes how important it is to manage expectations before going to the drawing board. “Everyone involved in a project has a different point of view of what's going to come out of it,” he says. “Until we all agree on the outcome, it's a struggle to be as effective as we need to be. And the deeper you go, the tougher it gets to make changes, and the more each change costs.”
“The only way to control a major building project is to be fully informed of the cost impact of every decision made,” Bailey adds. An officer and consultant with one of the nation's largest general building contractors, Bailey uses a life-cycle analysis tool in the early planning stages to chart costs for constructing as well as operating a facility.
Once the goals are clearly understood, Bailey recommends conducting frequent reviews during the life of the project. Wallace echoes this by his own practice of revisiting cost issues “early and often.” And, although his design/build approach uses standardized data that makes it easier to set costs early, Berry says routine in-process reviews are critical to later cost-shifting decisions.
The three approaches share common ground on the fundamentals of defining project goals early and reviewing them regularly. But each professional has developed a unique strategy within their specific approach for further managing and controlling costs.
Design/Build: Matching Costs and Expectations
The design/build approach matches costs, scope, and quality expectations with what an owner can afford. Tom Berry uses a comprehensive database of materials and cost data compiled on similar projects when he starts discussions with an owner. “With the database at my fingertips, already I have a greater ability to control costs and help the owner become my partner, so to speak, in understanding what's possible and what isn't,” he says.
Berry relies on this vertically integrated information, the experts he sources, and his own experience to make the early project planning a foundation for structuring costs economically. The combination lets him guarantee a price earlier in the process. When and if cost shifting is necessary, he and the owner return to the database to review the options.
Like other designer/builders, Berry concentrates on a market segment—in his case, health care—so he can develop a database that targets client needs and expectations. “Health care is a tight-margin business, so I must understand everything related to cost, including where we can and cannot cut corners,” he says. The design/build model has a unique way of keeping tabs on costs and quality, he observes, since every detail of the turn-key approach is managed under one roof. Good firms, Berry notes, do their own quality control internally and hold themselves to tougher standards than any outside monitor would do. “We live it every day, we're there throughout the process, we can make sure a project is done right.”
In Berry's view, design/build clients buy a product rather than a service and they really need to know it well. “I rely on a high level of interaction with the client from day one,” he notes. “There is no faster way to get a building done at a guaranteed price in a competitive market.”
Construction Management: Measuring Cost Impact of Every Decision
Ken Bailey views “teamwork” as the key consideration on a building project, the lynchpin for controlling costs and delivering on time. His team for most projects includes the construction manager, the architect, and the owner, each with a responsible part to play in the project's outcome.
“The unique role of construction manager is to make owners and architects aware of where the real value is on a project,” Bailey says. “We advise on what it costs to do what's on the plans and, in that way, establish realistic expectations.”
Early on, Bailey runs a life-cycle analysis that shows how different design and materials decisions will affect long-term use of the building. He considers the owner the “ultimate authority” on spending and feels they need to know what they are buying. “I use a formula where I add the construction price tag to the cost of operating a building to come up with the true total cost of a project, ” he explains. “When we know this, we can control costs without diminishing the value of the project because we can balance cost reductions against the life-cycle of the building.”
Since construction managers guarantee project costs against their fee, it is natural to expect them to put the brakes on when a project is over budget. Bailey emphasizes that the construction manager's job is to oversee the scope of the project and stay on budget within quality standards—not to stifle creativity. “I can keep the focus on the owner's expectations without usurping the designer's or anyone else's prerogative,” he says. “The best work of one benefits the best work of the other.”
Architect/Engineer: Do It Once
When an architecture and engineering firm organizes a building project, this is often seen as the “traditional” approach. Dennis Wallace says he and his firm find themselves working in every approach—as lead consultant, partnering with a construction manager, and as part of a design/build team. In each instance, he says, the architect plays a pivotal role in managing and controlling costs, especially in the early stages.
“No matter which approach an owner takes, the architect needs to get involved early on cost issues and stay involved throughout,” Wallace notes.
Wallace starts with a comprehensive project definition phase. He works with the owner to detail five major project issues:
- programming/functional needs of a facility
- site questions and concerns
- building systems requirements
- construction schedule
- project budget
“Each issue needs to be reconciled to the others and updated frequently,” he says. “If any issue is ill-defined, the project has a chance of going out of control.”
He also swears by a strategy of predesign—an initial phase before producing concept drawings and schematics—which he uses to formalize the scope of the project and correct any miscues early. “This helps us shape a set of balanced expectations and keep the project process as linear as possible. It reduces the need to circle back for a costly redesign,” Wallace explains. “‘Do it once' is another way to look at it. After all, we're most effective if we solve difficult issues before they become problems.”
Wallace views architects as ideally suited to bring the discipline of cost controls to a project. “Our compensation most often comes from our labor and is not related to the cost of the project,” he says. “That distance gives us the ability to take an unbiased view of many aspects of a project. We may not always like dealing with the nuisance of cost issues, but we will ask the hard questions.”
Which Cost-Control Strategies Work Best?
The choice of project delivery method depends on variables like funding, time constraints, and project objectives. This view from the experts substantiates that, regardless of delivery method, effective cost controls depend on a commitment to thorough planning, good communication, and rigorous monitoring of a project from start to finish. Building professionals and owners should find it easy to borrow and incorporate many of these cost-control strategies into their practice.
Written by Mary Maher
This article is based upon work supported by the University of Wisconsin–Madison Department of Engineering Professional Development. It is for general information and distribution. It is not intended to provide specific solutions or advice for specific circumstances, which should be sought from appropriate professionals.