Nearly all commercial construction projects arrive at the tender stage, requiring those bidding for the project to look firmly into Value Management. But how have they got here? Why are these projects landing on desks often very far from meeting the feasibility that initially gave the early stages of the project the green light?
There seems to be a worrying trend of limiting the work undertaken by the consultant design team at the initial stages of a project to save costs. Documentation often gets to tender at only 50% complete. Leaving a great void in the information that needs to be guessed, assumed and estimated through the tender process and all based on saving costs. But most importantly, there is a lack of design management in this early process, to bridge the gap between the design team and estimator. To highlight the requirements that aren't in the drawings,
But let's go back earlier in the project phases. How did this divergence of expectation, cost and quality occur? What leads to this disparity at such an early stage of the project. When the initial feasibility of the project is developed, it is done so based upon a required outcome, usually profit and an estimated build cost. However, maybe we should be thinking of the estimated build cost another way, perhaps it should be called 'required build cost'. As if the project cannot be constructed for that sum, then the feasibility fails.
Further clarity is needed to make sure that the estimated build cost is as accurate as possible. But here is one of many issues. To save costs, many projects are cutting back on fees to consultants. A design manager is not engaged early and on client-side, to fully assess the initial concepts and cost estimate, to clearly determine and define the outcome requirements of the project, and to assess the risks and opportunities thoroughly.
Design teams are also being required to deliver at a reduced fee, leading to less information in the documentation and diminished detail to produce a thorough cost estimate. So the divergence is already happening. We have a concept design with little detail, a limited or no design brief and a cost plan that has had to be formed on many assumptions.
Early design management would bridge this gap. The Design Manager would question many of the cost plan assumptions; they would add further detail to the concept plan, often by way of a report, leading to a more comprehensive estimate.
Returning to the tender stage as previously. The client has saved on consultant fees but has provided a set of documents that lack detail. The bid team, as best they can fill in the documentation gaps, but also add a sum to manage the consultant design team to complete the documentation. This sum, along with the builder's margin, is added to the construction price.
So where does this leave the client? The client is still going to have to pay for the design consultants fees but through the construction phase. However, they now have the original full documentation fees as well as the builder's margin and management fees. The client then receives a higher tender price based on the limited information added risk sum and consultant fees margin and management as the divergence increases.
The project is suddenly not meeting the feasibility, and aggressive Value Engineering is required late in the project process. Using the analogy of a journey as the project process, if a small error is made along the way, once discovered, it is simple to retrace your steps back to the last correct milestone and go the right way. However, if from the start you go in the wrong direction, even slightly off course, and keep going, then you will be a long, long way from where you should be. It's much more challenging to go back.
So, to add real value and reduce risks, its better to assess these, with the right consultants at the start and stop the divergence early.