Cost Management before Construction

May 2018
When starting a new construction project, as with most business decisions, understanding the cost implications and maintaining cost control throughout the project is essential.

Owners need to understand the fiscal impact of every design decision from the start. Transparency and honesty around design and cost are vital for the team and Owner to ensure a smooth construction process and satisfied end users.
Cost Management is a service of its own, encompassing feasibility studies and conceptual estimating; bid package assembly, review, and contractor selections; value engineering; change orders; and contractual claims. Below we outline what role the Cost Manager has before construction begins and what value it brings to a project.

Due Diligence
During the Due Diligence phase, the Cost Manager will conduct a feasibility study. The study should take place before a project is started or even announced to be under consideration. The studies purpose is to analyze construction costs including labor, materials, and land development, site servicing, and operations and maintenance the building will need. For commercial and public projects, possible building size is examined within the land area and budget outlined. These studies also include market factors such as land value and projected profit from sale or rental, financing arrangement options, and profitability potential.
The knowledge gained in this phase will allow the client to start making decisions around a proposed budget, project size, and overall viability - if the end product in the outlined project will be able to meet their needs. The Architect will also be able to use the information to start looking at design possibilities including shape and size.

Schematic Design and Design Development
The cost management team play an essential role in the Schematic stage and through Design Development working to help establish design solutions within the allocated budget. Using the first set of minimal drawings, the Cost Manager will be able to give a base cost to establish if the project of the proposed size and nature would be feasible within budget. Generally, various options are presented for the team to study the costs and assist the client in establishing the shape and size of the structure.
Once shape, general aesthetic, and size are established, the Architect will continue to design the building. The Cost Manager continues to work alongside the Architect as they progress with the drawings, assisting with value engineering. This is paramount to keep the design aligned to the original client goals while keeping the project within the established budget.
Once the drawings are complete, the Cost Manager will cost the entire project to create a base estimate for the building. This estimate will include forecasts for individual elements costed in relationship to the larger structure. Breaking down the cost estimates in this way allows final designs decisions to be considered by the client with a greater understanding of the fiscal implications. With the project goals, scope of work, drawings, and an established baseline cost, the team is ready to draft the Request For Proposals (RFP) package for bidders.

Request for Proposals
The insight and knowledge the Cost Manager will have gained from working on the whole project with the Architecture team allow them to pull the bidding packages together in a more intelligent manner. They can group items where needed and rearrange pieces for better cost comparison between bidders. It also assists in establishing milestones and project payment schedules to be included in the bid package.
The Cost Manager and Project Manager work closely through this phase, pulling all the necessary information for the potential bidders. These packages will include the scope, budget, schedule, and contract terms. Bidders will ask questions which ultimately will pertain the information compiled by the Cost Manager who will need to be on hand to assist in drafting responses and clarifying areas of confusion.
Often the most standard part of a Cost Managers role is reviewing proposals from General Contractors. With their in-depth knowledge of the project, from joining at the start, the team is well positioned to understand each response. A smart team will not solely award the project based on cost alone, the contractor needs to be able to prove they understood the project, it is feasible for their business to complete it, and they will be able to source the materials as needed.

Through these phases, it is easy to see why a Cost Manager is essential on a project from the start. Often Owners rely on Architecture firms to run cost reports, or a GC to work with the team and establish the cost. However, having a third party organization work collaboratively with the Architect to then appoint the General Contractor brings better value to a project and helps the client understand the decisions they are making in relation to the cost and design. With a Cost Manager assisting from the inception of a project, cost related problems can be mitigated early, allowing transparency on expenditures from the start, and aid in better cost control once a project is under construction.

To learn more about a Cost Managers role during the construction phase watch for our next article or sign up to our mailing list and we will send it once it is published. For any questions or comments relating to this article, please reach out via email through info@rupertservices.com or drop us a note on the contact page.
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