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By Altus Group | May 12, 2020

We all know the saying a stitch in time saves nine. Over the past couple of years developers and property owners have been cashing in on the red hot Toronto property market. Time is of the essence in construction and in the property market there have been many construction projects starting, with the focus being on maximizing revenue and maintaining schedule, with cost control often falling by the wayside.

There can be no doubt that while revenues have been increasing, best design and procurement practices have sometimes been compromised. As a result, projects have often been built for more than they should have been; and in some instances, trying to solve outstanding design issues during construction has led to schedule delays, resulting in the submission of significant claims. This is on top of all the change orders during the construction phase. The stitch in time has been sacrificed; and the continuing increase in revenues has been able to mask the cost and time overruns. It reminds me of times during my undergraduate degree when we had open book tests.  I wouldn’t study, and would wing it (as they say)!  I learned very quickly that while such an approach might sometimes work, outcomes were rarely positive.

Several of our clients have asked us to review the cause of change orders, and guess what one of the biggest contributors (if not the biggest contributor) usually is? Design co-ordination.  Another common contributor is scope gap and / or partially bought scope by the construction manager. These changes could be avoided by investing more in the design and tendering phases of the project. 

AutoDesk and Dodge Data recently issued their Key Performance Indicators of Construction report. It is worth noting that of the 209 respondents, 46% were large companies and 54% were small companies, and the sample was a mix of trades, construction managers and general contractors. This representative sample is illustrated below:

209 respondents:

AutoDesk and Dodge Data - Key Performance Indicators of Construction report - respondent profile

One of the figures from the Dodge/Autodesk study of how metrics are composed in the construction world, showing the profile of the respondents. (Image courtesy of Dodge Data and Analytics.)

From their research, the first of seven of the KPIs they looked at was ‘Problems discovered in construction documents’.  54% of respondents noted they frequently capture errors and omissions and constructability issues in the construction documents, and only 47% frequently compare errors to past projects. Furthermore, only 66% of those who are actively capturing past errors, omissions and constructability issues are using them to mitigate issues on future projects. It is great to know that past issues are being captured by many, but what is the purpose of capturing if not applying the learnings to the next project?

Every construction project I have worked on throughout my career has incurred changes. It would be fair to say that some have incurred far more than they needed to, and some changes are beyond anyone’s control. However, changes tied to design co-ordination, scope gap and construction manager initiated changes can often be prevented by slowing down the design and procurement phase and planning things in more detail.

The recent slowdown due to the COVID-19 pandemic has given owners and developers the perfect opportunity to evaluate their processes, solve outstanding issues, tidy up the drawings and specifications; and make sure the procurement and tendering processes are in good shape and being set up to buy scope as cost-effectively as possible.

With a strong desire to keep soft costs to a minimum, there is definitely a reluctance amongst owners to invest more in the design and tendering phases of the project.  This means lessons from past mistakes are not being captured and leveraged moving forward.

Let’s quickly do the math. On a $200 million construction project, 1% in changes will cost $2 million. Several projects are incurring over 5% in changes, meaning they are losing $10 million. If the design and construction team can mitigate half of those with a bit more planning, that’s a saving of $5 million.

Spending a bit more on the design team prior to construction seems to make a lore more sense, especially with millions of dollars in savings being left on the table.  Furthermore, the site is likely run far more smoothly, and the team’s focus once construction starts can shift to building, as opposed to constantly addressing RFIs and schedule issues that emerge. As they say, a stitch in time saves nine.

 

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