Construction can contain hidden risks for the unwary, however if a project starts off with the right foundations in place during the pre-construction phase, you are more likely to have a successful project when the works actually commence. In this blog post we discuss 4 key commercial activities which we believe should be undertaken to manage cost and minimise risk before starting your next project.
1. Set a cost limit at the outset
Feasibility cost studies should be undertaken at project inception to ensure that it is commercially viable for the developer before they overcommit. This can be done prior to making an offer on a development site or building. This also offers the developer an opportunity to explore the most valuable design proposal. All members of the professional team should be made aware of the cost limit for the project and should work with this in mind during design development stages.
2. Cost checking during design development
As the design progresses, the Quantity Surveyor should undertake regular cost plans to ensure that the design is progressing in line with the original cost limit set for the project. This allows the professional team the opportunity to review progress against the original budget and change course or make amendments to the design if necessary to help maximise value and cost efficiencies. A proactive approach during these stages can save time and money.
3. Pre-qualification of contractors
At the tender stage, contractors should be selected based on their appropriateness to deliver the project. Their ability to do this can be assessed through pre-qualification questionnaires or interviews with potential proponents. Technical experience, health and safety record, current workload and commitments, project team, financial standing are key considerations when selecting a suitable tender list.
4. Have a construction contract in place
Industry standard construction contracts such JCT or NEC properly record the agreement reached between the parties including but not limited to their obligations, price, payment, programme, design liability, dispute resolution and so forth. This avoids any ambiguity and sets a clear procedure for project delivery.
Selecting the right contract is very important and depends on the specifics of the project and desired procurement route (a topic for another blog). Time, cost, quality and risk aspirations should be considered. It is advisable that the Employer/Developer seeks professional help when deciding on the appropriateness of a contract as well as compiling and filling out the contract documentation.
