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Construction Pitfalls to Avoid, by Corinne Maddox, CCM, CFM (as appeared in the Houston Business Journal)

Construction projects are loaded with risk for owners and tenants cost and schedule over runs, litigation and dysfunctional teams, to name a few. With every project varying widely in scope of , design, site conditions and market conditions, it is very difficult to apply meaningful industry benchmarks that identify the true impact of mistakes. Preventing common pitfalls can reduce project costs by as much as 30% and substantially reduce the risk of problems. Here are some of the most common pitfalls and how to avoid them:

Project Leadership Companies often assign a key employee who does not have enough time or experience to take on project responsibilities. Lack of attention may result in loss of cost and schedule control, and the additional project duties may adversely affect the employee's core business workload. An employee without experience in similar size and type projects may not be aware of contracting pitfalls, what items should cost, what services are standard, and how to find the best consultants and contractors. Rollie Andre, Henry S. Miller Commercial notes, "The use unqualified architects and contractors - a friend, brother-in-law, etc. - can have a disastrous effect on a project."

Front End Planning: Tenants should fully convey their financial, functional, schedule and growth requirements before starting the design phase, as well as thoroughly review progress drawings to assure the requirements are being met. In their eagerness to begin design, architects often rush the critical phase of defining the tenant's requirements; and in their passion to create a masterpiece, budgets are often neglected. As additional requirements are identified, extra time and funds are required to make revisions. The scramble to cut costs late in design or after construction begins results in a disproportionate loss of value, aesthetics and functionality.

Contract Terms It is surprising how often tenant's simply sign a contractor's proposal or standard contract. Even contracts offered by professional organizations (AIA and AGC) are written to promote the interests of their industries. Contracting tips:
  • Define what is included in the contractor fees, general conditions and subcontractor costs, to avoid paying for the same item more than once.
  • Identify the contractor's billable staff, qualifications, billing rates and time commitment.
  • Clarify and price all bid limitations, exclusions and allowances to get "apples-to-apples" bids.
  • Define who pays for building and energy code upgrades, asbestos removal, supplemental electrical and mechanical capacity, or other potential landlord items.

"Tenants often fail to understand the value of the lease's construction allowance and the cost of special improvements. They are shocked when the project costs exceed the allowance, and they are expected to pay the difference." Mark Wood, Henry S. Miller Commercial

Tenant Items Tenants are generally responsible for voice and data systems, security systems, furniture and specialty equipment, yet often fail to plan and budget for it. There is often more money at stake in these areas than construction, so the same level of attention is needed. Slow decisions and poor coordination results in lost momentum for the design and construction team, out-of-sequence work, change orders and claims, leading to loss of quality and missed deadlines.

"Most construction delays are caused by tenants not getting documentation and information back to the team in a timely manner." Tom Ford, Henry S. Miller Commercial

Project Closeout At the end of a project, often team members' fees are used up and they are being reassigned to new projects. As a result, completing a project can be difficult. The timing and scrutiny of final payments to project team members is critical to maintain the tenant's leverage to finish the last details. Before final payment:
  1. Obtain lien waivers and assurance that all subcontractors have been paid.
  2. Finalize contract allowances and perform construction audits (for cost plus contracts).
  3. Obtain a full project directory (including subcontractors and suppliers), copies of construction documents, warrantees, etc.
  4. In addition to the standard 10% retainage, withhold ample money to cover all corrective work.
As the construction industry and tenant requirements become increasingly complex, and contractors have grown increasingly sophisticated, inexperienced tenants face more challenges than ever before. These issues are just a few in a comprehensive program of project management techniques that will minimize cost and schedule, maximize value and quality, and assure a tenant's requirements are met. Avoiding pitfalls will substantially increase the likelihood of project success.

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