By John Voket, RISMedia Columnist
RISMEDIA, September 2, 2010—In a previous segment, we introduced the concept of controlling cost overruns in construction projects. And while applying cost containment to major commercial and public projects can certainly save consumer money in the long run in their local, state and federal tax bills, applying certain standards to smaller residential projects can save individuals even more money—and much more immediately.
There are a few areas outlined in attorney Barry LePatner’s recent book, Broken Buildings, Busted Budgets: How to Fix America’s Trillion-Dollar Construction Industry, that individual homeowners can apply when mounting their own residential construction projects. Specifically, LePatner identifies incomplete drawings as a prime culprit where better control up front can affect substantial savings in cost and time.
LePatner says incomplete drawings allow contractors to bid low in order to win projects, and also prevent them from providing an owner with a true fixed price for all work required to complete the project.
To “expedite” construction, construction managers routinely require the owner’s architects and engineers to issue incomplete drawings and specifications to contractors as the basis for the project contract. Lacking complete scope information, the contractors must infer and make cost assumptions on the “missing” design elements since they are not provided with detailed information on the project design.
“What results are agreements that ultimately allow for myriad exclusions, allowances, and pricing assumptions based upon the incomplete design,” says LePatner.
Once a project is under construction, owners have very few good options to dispute these charges because delaying the project to settle these problems will only lead to more delays and costs. LePatner’s C3 Model ends this problem because it requires contracts to be based on fully completed designs.
The LePatner C3 Model also ensures that the owner has, for the first time, accurate pricing information on the actual costs reflected on the design drawings.
He says owner representatives and their cost estimators will be valuing the design as it proceeds so that by the time bids from prospective contractors arrive, the owner will know if they are truly competitive. This information can ensure a fair profit for the construction team to reflect the risks they will take to complete the project on time and on budget.
Our next segment on the subject will take a look at change orders, and the overruns that result from ineffective design and construction agreements. In the meantime, check out LePatner’s new white paper, The LePatner C3 Model: Construction Cost Certainty, which is available for download at: www.BarryLePatner.com.
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