How To Find Big Savings In Construction Projects Construction administration involves numerous people, permits, legally binding contracts, competitive bids, and a substantial amount of time and money. Yet there are ways to guard against spiraling construction costs and expanded deadlines for project completion. Knowing what to expect - including the places costs typically "hide" - provides an edge for efficiently managing the construction process. Step one A well-defined interview process will assist you in selecting the best construction manager (CM) for the job. Be thorough; replacing the CM once the job has begun is costly and raises serious questions of liability. For renovation work, invite only CMs with considerable related experience. Interview previous clients to determine the CM's ability to handle change orders, unforeseen elements and client decisions. Insist that the project executive, project manager and project superintendent assigned to the job be present at the interview. (The executive represents the company, the manager spends the owner's money and the superintendent is the on-site contact.) Closely observe the interaction between these people. A successful project can hinge on the working relationship between them. Require all interviewing CMs to submit a detailed account of what they heard and agreed to at the interview. This important document will reflect the CM's understanding of your conditions and form the basis for contract negotiations. This document will also serve to suppress potential disputes arising from construction contract issues. Where costs hide The construction contract between the owner and CM is a legally binding contract but its terms are not universal. The owner should negotiate the specifics of the contract requirements and the particular needs of the project. The more knowledgeable the owner - often represented by the facility executive - is about the nature of the terms of the contract, the greater the awareness of the potential for hidden costs. Uninformed owners can unwittingly agree to pay more money for a longer period of time than necessary. Demonstrate your understanding of the construction process by first knowing the unit prices and labor costs of every item you agree to purchase and negotiating the following standard construction contract line items. • General Conditions. General Conditions should only be those non-construction costs that are necessary to get the job done and are directly applicable to the project. All general conditions should be a line item amount agreed to and guaranteed before the start of construction. Typical components of general conditions include funds for a site office, on-site project administration labor and necessary office equipment. Do not accept an amount that is expressed as a percentage of the cost. Substantial savings can be realized by asking the right questions about general conditions. For example, question the site office requirements presented by the CM, including how much new equipment is necessary. Who should assume the cost of purchasing and installing the computer equipment and software the CM lists as a site office requirement? • Overhead. Overhead is the CM's cost of doing business. Should the owner be responsible for that cost? An argument can be made that the owner need only pay for costs directly applicable to this specific project, and not for costs the CM incurs on other jobs. This line item in particular is often the subject of legal disputes. Do not be afraid to eliminate elements of cost contained in this category and, again, do not accept an amount that is expressed as a percentage of the work. • Hourly Wages. Agree to pay only the wages for work on your project. The actual hourly wages, taxes and benefits (not a multiple of these) are the owner's responsibility. Time off and educational seminars are not. Avoid a situation where you are asked to pay wages for a general superintendent or any other part-time super

1. How To Find Big Savings In Construction
Projects
Construction administration involves numerous people, permits, legally binding contracts,
competitive bids, and a substantial amount of time and money. Yet there are ways to guard against
spiraling construction costs and expanded deadlines for project completion.
Knowing what to expect - including the places costs typically "hide" - provides an edge for
efficiently managing the construction process.
Step one
A well-defined interview process will assist you in selecting the best construction manager (CM)
for the job. Be thorough; replacing the CM once the job has begun is costly and raises serious
questions of liability.
For renovation work, invite only CMs with considerable related experience. Interview previous
clients to determine the CM's ability to handle change orders, unforeseen elements and client
decisions.
Insist that the project executive, project manager and project superintendent assigned to the job
be present at the interview. (The executive represents the company, the manager spends the
owner's money and the superintendent is the on-site contact.) Closely observe the interaction
between these people. A successful project can hinge on the working relationship between them.
Require all interviewing CMs to submit a detailed account of what they heard and agreed to at
the interview. This important document will reflect the CM's understanding of your conditions
and form the basis for contract negotiations. This document will also serve to suppress potential
disputes arising from construction contract issues.
Where costs hide

2. The construction contract between the owner and CM is a legally binding contract but its terms
are not universal. The owner should negotiate the specifics of the contract requirements and the
particular needs of the project.
The more knowledgeable the owner - often represented by the facility executive - is about the
nature of the terms of the contract, the greater the awareness of the potential for hidden costs.
Uninformed owners can unwittingly agree to pay more money for a longer period of time than
necessary.
Demonstrate your understanding of the construction process by first knowing the unit prices and
labor costs of every item you agree to purchase and negotiating the following standard
construction contract line items.
• General Conditions. General Conditions should only be those non-construction costs that are
necessary to get the job done and are directly applicable to the project. All general conditions
should be a line item amount agreed to and guaranteed before the start of construction. Typical
components of general conditions include funds for a site office, on-site project administration
labor and necessary office equipment. Do not accept an amount that is expressed as a percentage
of the cost.
Substantial savings can be realized by asking the right questions about general conditions. For
example, question the site office requirements presented by the CM, including how much new
equipment is necessary. Who should assume the cost of purchasing and installing the computer
equipment and software the CM lists as a site office requirement?
• Overhead. Overhead is the CM's cost of doing business. Should the owner be responsible for
that cost? An argument can be made that the owner need only pay for costs directly applicable to
this specific project, and not for costs the CM incurs on other jobs. This line item in particular is
often the subject of legal disputes. Do not be afraid to eliminate elements of cost contained in
this category and, again, do not accept an amount that is expressed as a percentage of the work.
• Hourly Wages. Agree to pay only the wages for work on your project. The actual hourly wages,
taxes and benefits (not a multiple of these) are the owner's responsibility. Time off and
educational seminars are not. Avoid a situation where you are asked to pay wages for a general
superintendent or any other part-time supervisory personnel.
• Construction Fees. To determine a fair construction fee, negotiate a percentage based only on
the cost of the work. Be careful of the language of the contract. All fees are a direct percentage
of the cost of the work, before the contingency and general conditions are added. A fair 4 percent
construction fee could be 4.5 percent if taken as a percentage of a cumulative total. On multi-
million dollar jobs, this can represent a substantial amount of money.
Insist that the fee be converted from a percentage to a fixed amount before construction starts.
Once construction starts and the potential for change orders (that can increase the cost of the
work) exists, the fee will continue to rise without limit. Don't allow the construction budget to be
compromised in this way.

3. • Contingency Fee. Most CMs require that a contingency fee be built into the guaranteed
maximum price. The only responsible way to manage the necessary contingency fee is to insist
that it be jointly controlled by the owner and the CM. Neither the design nor the construction
process is a perfect science; CMs will insist that they need to "manage their risk" with the
contingency fee. Maintaining some control over the allocation of funds will enable the owner to
best justify the expenses.
When negotiating the contract, the owner must "buy the schedule" with the cost of construction
and guard against it slipping. Extending the construction phase is a costly decision.
Agree on the completion date of the project and insist that a penalty be levied if the project is
delayed. Do not agree, however, to a bonus if the project is finished before the scheduled
delivery date. The CM might deserve a bonus for early delivery if extraordinary problems were
overcome, but does not necessarily deserve bonus dollars for performing the job you hired them
to do.
Change orders and substitutions
In negotiating the change order procedure in the construction contract, the owner should demand
a "no work stoppage" clause. Too much time can be wasted if work ceases in anticipation of a
general agreement of change order amounts and schedule implications.
When presented with a change order, the architect should consider both the money and time the
CM is looking to add to the job. Each is open for discussion. Don't wonder why construction isn't
finished and then discover the architect has authorized an additional week of accumulated
change orders.
While the CM should aggressively pursue reasonable substitutions on your behalf, be sure you or
your architect knows the cost of the originally specified product and the cost of the alternative.
The construction contract should state clearly that cost savings realized by the substitution for a
specified product go directly to the owner. Here, too, substantial savings can be realized.
As your architect's last element of control over the quality of the project, the punch list must be a
thorough process. Accompany the architect to look at the job. Try to anticipate any problems that
may arise once the space is occupied. If a fault is discovered after the owner has released the
CM, the issue will be more difficult, time consuming, and expensive to remedy.
Secrets of a successful renovation
To successfully manage a renovation process while the facility remains in operation, consider the
following ways to minimize cost and disruption:
• What you see is not what you get. In most cases, the older the building you are occupying and
renovating, the greater the potential discrepancy between the budgeted and actual costs of the
renovation. Work with an architect and a CM who have enough renovation experience to

4. anticipate potential unforeseen elements (electrical, mechanical, environmental and code
compliance) and to quantify the cost of the work before the construction contract is signed.
• Designating a "swing space." If your project requires renovating existing spaces while you are
occupying them, provide a "swing space" for temporary use by each displaced department as its
permanent space is modified. To determine the order in which the areas are renovated, consult
with department managers and the CM to minimize the disruption to company productivity and
maximize the efficiency of the renovating and moving processes.
• Building a "smart" addition. If your renovation includes building an addition onto the space you
are occupying, minimize traffic, dust and noise by building as much of the addition as possible
before breaking through to connect with the existing spaces.
• Establishing a presence. As the facility manager, your knowledge of the facility and daily
operations makes your presence in the process invaluable. Attend weekly construction meetings
and address issues before they become magnified and more costly. Often, because of your vast
knowledge of the building and its systems, you will understand the issues and can offer a
workable solution more readily than the construction team.
Opening the lines of communication
Precise communication with all of the individuals involved in the process, especially the clients
you service and the employees who must be accommodated, is essential. One extreme case - the
renovation of a hospital emergency room - demanded the cooperation of the local police,
ambulance services, and other area hospitals to reroute and accept patients.
Common scenarios involve notifying staff of an activity or a move (start date, duration,
specifics), discussing the arrangement for temporary facilities, ensuring safety and security, and
providing additional signs to redirect visitors. The more accurate the construction schedule and
the more open the lines of communication, the more efficient and less expensive the process.
Weekly progress coordination meetings should be attended by building administrators,
maintenance and engineering staffs, and each subcontractor to review progress. Detailed meeting
minutes should be distributed both internally and to the appropriate regulatory officials. These
minutes will be the core documentation vehicle for the project.
Not every owner or facility manager has the time, interest or expertise to devote to project
management.
The owner can still protect his or her interests by hiring an advocate to coordinate and oversee
the construction process. As the owner's representative, this individual defines the development
process, negotiates project contracts, schedules and monitors all stages of the construction
process, and coordinates communication between participants.

5. The fee for this service can be offset by substantial savings in construction costs. Many clients
hire these experts to "fix" a project that is already in trouble, but an advocate is most valuable if
consulted from the start.
Julian Arhire is a Manager with DtiCorp.com – DtiCorp.com carries more than 35,000 HVAC
products, including industrial, commercial and residential parts and equipment from
Honeywell, Johnson Contols, Robertshaw, Jandy, Grundfos, Armstrong and more.