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Design It Right and It Will Be Built... Successfully
James B. Salter, January 2002


"How did this project get so over budget?!?! Our Board of Directors approved a budget of $65,000,000 all in and our lowest bid is $80,000,000." For years we have been getting calls from irate developers, owner/operators, and joint venture lending institutions asking that we assist in taking over and value engineering construction projects that have experienced budgets gone awry (i.e., "GROSSLY OVER BUDGET"). Time and again we have found that the primary causes can be laid at the feet of one of the following:
  1. Mis-Scoped Project
  2. Non-Accountability of In-House Design and Estimating Staffs
  3. Lack of Design Management
  4. Reliance on General Contractor's Pricing of Preliminary Drawings
  5. Poorly Planned RFP's, Bidding, and Contract Negotiation Strategies
No single cause is mutually exclusive, and oftentimes more than one mistake is made on the same project, but let's review each cause independently.

Mis-Scoped Project - As is usually the case, a due diligence design/construction team is brought on late in the project, and there is a rush to generate an anticipated design and construction budget. Often, the analysis is based on the seller's concept of the project's potential, and the cost analysis is prepared by a quantity surveyor who is 3,000 miles (or further) from the intended project and utilizes Means catalogs for cost data. The quantity surveyor or estimator generally has little knowledge of local means and methods, and he does not have access to local materials or primary labor types. The design that is to be built is generally drastically changed from that which was first analyzed. Entitlement hurdles are often underestimated, and there is a lack of clear local understanding.

Non-Accountability of In-House Design and Estimating Staffs - More often than not, the team that originally scoped the design and cost is not the same team that must execute the project. Thus the lack of accountability leads to carelessness and blame. Also, the original team is often under considerable pressure both from a corporate desire for the project to work economically, and under a very tight time schedule in which to provide budgets, schedules, and entitlement risk analysis.

Lack of Design Management - Without a doubt, a primary cause for unwanted surprises in actual costs versus budget costs of construction projects is a poorly executed and entitled design process. Generally, a poorly thought out and planned project scope that is inconsistent with market requirements is a recipe for disaster. The design team is left to its own devices to complete the drawings without systematic and scheduled specific budget, quality control, and scope adherence back checks. The owner/developer does not establish an independent team leader to direct the design team who is knowledgeable in the market and product type, and who is not afraid to say no to the design team when design conflicts with budget restraints.

Reliance on General Contractor's Pricing of Preliminary Drawings and Budget Control - The process of design assist costing by a local general contractor without proper management and clear establishment of ground rules has brought many projects to a lack of fruition. This process, when left unmanaged and without a clear set of ground rules, often lends itself to serious conflicts of interest, alienation of competitive contract pricing and, in some cases, litigation.

Poorly planned RFP's, Bidding, and Contract Negotiation Strategies - The way in which a project is taken to bid, the process of bidding, and the contract strategy can often be the cause of a project's success or failure. Poorly drafted RFP's and Request for Bids can have a serious impact on the quality and competitive nature of the bid.

Success of the development/construction process would best be effectuated if the project incorporates the following:
  1. Ownership must have clear and realistic project goals that are candidly shared with the Project/Construction Manager.
  2. Ownership must provide a knowledgeable, fair, consistent Project/ Construction Manager (team leader) who is accountable from the inception of design to the completion of the punch list. He must fairly represent the ownership goals and objectives and insure that the entire team adopts these goals and objectives.
  3. All design and construction team members must be committed to achieving all project goals relating to budget, schedule, and quality level from the commencement of team formation.
  4. A clear formal system of checks and balances relating to original scope intent, budget, and schedule must be established and communicated on a regularly scheduled basis. Updated status reports must be given to all team members on a regular basis.
  5. A formal system of reporting to Ownership by the Project/Construction Manager on the status and requirements for global project decisions must be established and adhered to.
  6. All team members' opinions and concepts must be heard and respected prior to making final project decisions.
  7. The Project/Construction Manager must be clearly placed by Ownership as the project's leader, i.e., "Benevolent Dictator".
  8. Regular constructablity and quality control mechanisms must be put in place by the Project/Construction Manager to assist the design team in staying on track and limiting backtracking and re-design.








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