How to Save 21.8% of the Total Construction Project Cost

Research uncovers how to avoid the common pitfall that results in wasted time, effort and money in most construction projects.


Introduction

In every construction project, what matters most to every stake holder is:

1. A completed structure that meets design and safety specifications

2. The project to be completed on time

3. The project to be completed within budget.

However all too often construction projects fail to achieve these criteria. We have identified a common pitfall that undermines the ability to achieve optimal results in construction projects. Most of the issues that lead to expensive budget blow outs, costly delays in schedules and critical design flaws could be avoided if this pitfall was addressed.

In this report I detail the construction project challenges and mistakes that see this pitfall being so frequently experienced, even by very professional construction firms. This pitfall virtually goes unnoticed, although its effects are felt constantly, due to the way the construction industry has evolved over the centuries.

This report will explain how this state of affairs has been allowed to develop and also what needs to be done to avoid the expensive delays and damage that result. I will also detail a systematic approach that will enable you to achieve the highest level of quality, consistency and economic performance possible in your profession. The benefit of operating in this superior manner is that you not only reduce your project management costs, but you also gain so much extra productivity that your ability to perform at such high levels can become a major competitive advantage that puts your business at the head of the pack.

The Pitfall

Allow me to go right down to basics for the moment. The reason will become clear.

Currently, the work during the construction stage is split into several temporary sequences, and it is delivered to different specialists for its execution.

Every construction project requires the following elements:

1. The structure is planned and designed.

2. The technical structural integrity elements are determined

3. Construction phases completed

The major pitfall in most construction projects is that step two is seen as a necessary evil instead of a highly valuable component. As a consequence the construction phase begins under-prepared which results in the three main issues; construction delays, poor quality and budget over runs.

In construction projects the design requirements, constructive aspects and quality standards are defined during the planning phase. However, this important phase is usually carried out with insufficient interaction between the project owners, construction, engineering and design teams causing many problems during construction such us: incomplete designs, change orders, rework, construction delays, etc.

During the design stage the requirements of the project owners are planned and the constructive aspects and the standards of quality are defined through procedures, drawings and technical specifications. An important part of this process is to consider long term usage and maintenance costs as well as short term cost effective, efficient design.

Over the centuries a typical sequencing of construction projects has evolved. The design stage has traditionally been allocated to several different specialists for its execution. In building projects, first the owners select the architects or drafters who prepare the designs and specifications, and then the structural design, integrity, quality and safety specifications are developed by structural engineers.

Generally, the construction stage is the responsibility of a contractor selected by the owner.

The problems of this work sequence have been discussed for many years. The main problems that have been detected are the little interaction among design, engineering and construction specialists. This situation creates the critical pitfall in the completion of construction projects.

The consequences are sub optimal solutions, lack of constructability and a great number of change orders (design and construction rework).

In an article for Stanford University, (Application of The New Production Philosophy to Construction, Koskela 1992) Koskela wrote, “As a consequence of traditional managerial concepts, construction is characterized by a high share of non value-adding activities and resultant low productivity.” Despite the issues being highlighted so long ago, little has actually changed in regard to the way many construction projects are performed.

The consequences of the design pitfall are often significant. Koskela found that work on design changes for a typical project account for 40-50% of total design work.

Koskela also found that the cost of poor quality in the average business operation is in the range of 20-50% of the construction projects. The reason that this pitfall continues to exist is because construction projects are typically discrete events, which minimises the opportunity for the type of quality review and continuous improvement which is undertaken in repetitive manufacturing situations.

The outcome of the research indicates that greater collaboration and communication between all parties at the early stages of planning and design can eliminate the consequences normally experienced without this. The reality is that involving an expert engineering consultant early in the process will not change the overall design cost significantly, but the potential savings on the reduction of time delays through the project and reduced rework greatly reduce overall project construction costs, as well as creating more efficient and cost effective structures over the lifetime of the structure.

The Top 5 Reason for Construction Project Cost Blow Outs

Research has uncovered 5 major reasons for delays and cost over runs on construction projects as well as issues with

quality outcomes.

1. Suboptimal solutions

In most projects architects, developers, fabricators and manufacturers, provide their clients with quotes with significant fudge factors due to the amount of unknowns that may affect the ultimate cost of construction. This is typically a result of poor information gathering practices and lack of collaboration between parties.

Using engineering firms that have limited range of expertise has the potential to lead to delays or extra time taken to research appropriate solutions. This increases the potential for mistakes and added costs. Poor upfront planning leads to creating a project plan that has unknown time delays that cost additional time and money to resolve.

Malaysia’s Petronas Towers, constructed in 1992-1998, provides a good example of potential issues which may be encountered without sufficient planning, as well as the saving that can result from better collaboration and early involvement of expert consulting engineers.

The initial planning for the Petronas Towers project was based on an using an existing site that was available for the building. However when soil test were performed the initial location was found to be inappropriate due to a limestone cliff leaving one of the two towers suspended over the cliff and the other embedded in the lime stone, which obviously created huge issues for construction. Due to the new found knowledge of the lime stone cliff face moving the construction site cost a significant amount more in time and money that what they would have spent if the soil was adequately tested before the original site was recommended.

The decision was made to move the towers back from the important intersection to a location where none of the piles would reach the limestone. This move then saved an estimated $20 million on the cost of the foundations and resulted in a more favorable location for the project.

2. Frequent changes in the design during the project

Where issues that would lead to suboptimal solutions are detected during construction, plans are frequently sent back to designers for reconfiguration due to changed circumstances. All parties in the construction process are often under pressure from their own clients to get the job done quickly and they try to rush the process. The entire construction progress can be disrupted and earlier work even wasted if unforeseen factors that occur are significant enough to cause need for major design changes.

This occurs frequently where an architect’s plans have been submitted to council planning departments for approval before a consulting engineer has been involved. When engineering determines that changes need to be made for structural integrity or safety reason that were not originally foreseeable, the need to resubmitted plans for changes creates significant delays in the process and often leads to major blowouts in timelines for the project.

3. Don’t deliver projects on time,

Typically contractors are frequently being let down by their current provider of engineering services who either don’t meet their expectations or the promised delivery date. Experiencing poor service at this point or not having expectations met creates an initial set back which has a constant flow on effect throughout the project.

The critical factor which enables the engineering consultant to add significant value is mainly due to their internal management systems. When the internal process breaks down within the engineering component it creates a bottleneck. This inefficiency may be due to limitations in their production process and/or miscommunication amongst their staff or between them and the client. This issue may also arise from poor job management and tracking or people not sure of progress of jobs or expected milestones and deadlines.

Research conducted by the University of Kentucky found that delays caused by ineffective quality assurance processes can lead to project cost overruns of 22% compared to projects with effective quality assurance.

4. Lack of expertise and professionalism

Technology and construction materials are rapidly changing, which requires engineers to continuously update their knowledge and expertise. Where engineers lack experience in a specific area or fail to stay current with industry leaders problems can occur. This is often seen with sole practitioner operations that lack resources to deliver quality work or possess a limited range of expertise, which leads to delays or extra time taken to research appropriate solutions. The main issue that results from lack of expertise is that the engineer takes an ultra-conservative approach which leads to over design and over specification to allow for multiple factors of safety. Obviously over specification leads to unwarranted and unnecessary costs add to the production budget.

Many construction projects have also suffered from engineers who are willing to sit back and just do the job as prescribed, rather than proactively providing high value advice and innovating more enterprising and cost 2013 | How to Save 21.8% of the Total Construction Project Cost 5 effective solutions. Issues such as these have led to a lack of understanding of the value of proactive involvement of the expert consulting engineering firm.

A barrel store on a vineyard which needed to be temperature controlled, was originally designed with additional cladding added to a traditional building structure. When this design was reviewed by an engineer with greater experience in this area, the redesign eliminated a lot of unnecessary structural elements which resulted in a cost saving of over a million dollars while the building met all necessary functional specifications.

Many structures can be over designed by conservative approaches that result in safety margins being compounded through multiple processes that result in most costly structures than would be designed by someone with greater expertise who is more attuned to economic design concepts.


5. Short term perspective

An issue that is frequently experienced is where the structure is designed only with the view of minimising construction cost and neglecting the impact on the longer term usage and maintenance of the structure. Whilst the initial construction project may be minimised, longer term costs of the heating, cooling, lighting and maintenance may greatly out way the upfront savings.

Another area where project owners can suffer cost blow outs is in gambling with trying to short cut the engineering component across a range of projects. Rather than trying to minimize the costs on each project they would be better off by focusing on maximising profits across all projects. While some projects may go according to plan with no unforseen issues arising, unless the services of an expert consulting engineer are fully utilised it won’t be long until a major issue occurs that eliminates all of the potential savings.

Often a project owner can create unnecessary blow outs due to a lack of upfront planning that has led to project schedules that are too tight when unanticipated events create a need for changes to the project.

Situations where this can occur are particularly in the area of considering the future use of a commercial building or warehouse. Many of these buildings are able to be built more economically by using internal pillars to support roof struts, to reduce the cost of the roofing structure. However, this type of design significantly limits the potential variety of future usage options, which may reduce the income earning potential of the building over the long term.


5 Ways a Structural Consulting Engineer Expert Can Add Value to Your Project.

1. Unique Cost Effective Solutions

An expert consulting engineering firm demonstrated its expertise by continually developing innovative approaches to solving design problems to develop the most professional and cost-effective solutions that meet all legal and safety standards. This is achieved by developing superior management systems that enable engineers to communicate with clients as advisors rather than vendors. They will look beyond the initial problem and take into account the implications of any solutions before deciding on the optimal approach. A superior internal management system is achieved by using the latest technology that enables information gathering, knowledge sharing and collaboration to enhance the design process. This is combined with the knowledge and expertise of engineers who are oriented towards innovation and best practices solutions using professional engineering and design procedures.

Staying current with new products and methods is essential to achieve the most reliable and cost effective design and construction and to maximise long term efficiencies of structures.

2. Effective Information Gathering Systems to Facilitate More Effective Design

Nowhere is the adage, “More haste, less speed,” in evidence than in a construction project that is delayed because of missing vital information that should have influenced the up-front planning. An expert consulting engineering firm will insist on the client getting better quality geotechnical information, load bearing data and other critical design inputs from the start. They will help the client weigh the risk and cost of potential problems against the cost of better preparation and information up front. Usually, better up-front information will achieve a more cost effective design, ultimately saving the client money and avoid project blowouts.

An expert consulting engineer will create proactive communication processes to help clients be better educated, to be organised and prepared for each project. They will also operate in such a way to add value to other specialist involved in the project.

Under-engineered or under designed projects are avoided by better up front information, preventing future costly problems.

Time delays are avoided by better communication of known factors that are uncovered through better preparation.

Inappropriate soil material added to sloping site before proper approvals were received.

3. Accuracy, Speed and Value to Deliver Projects on Time.

An expert consulting engineering firm will operate in partnership with all parties. Where an ongoing relationship enables good communication and feedback loops to be established professional firm will set benchmarks and promised time frames around responsiveness and quality. They will develop internal processes to manage responsiveness around urgencies and established levels of response time frames.

They will be attentive to client requirements and manage their processes to fit with the client and to be flexible to manage the process so that the things that are needed urgently are done quickly but other less urgent matters can be delayed. Feedback to clients can be fast tracked through sound project management and communication processes which enable client accessibility to project and job tracking.

Research conducted by Assistant Professor Timothy Taylor and Ying Li of the University of Kentucky on the Impact of Design Rework on Construction Project Performance discovered the following results. Not only did they discover improvements in construction costs of 21.8%, but they also discovered a potential reduction of overall project completion time of 14.3% due to elimination of undiscovered rework.

4. Professionalism and Expertise

A professional engineer will stay at the leading edge of the industry by education and continuing professional development not only in their technical field but also in the area of project management and business processes. Professional engineers will provide more accurate advice about what is needed and provide accurate design specifications to give greater certainty in pricing the construction project through all processes. Early intervention gives clients more certainty about their planning and expenses.

At the moment, an “over-the-wall” practice prevails in the industry. In such a practice, the plans are given to the next designer or “customer” in the process until the plans are ready. Because no one seeks to support each other, this practice leads to suboptimisation, where the stakeholders just strive for optimising their own performance. Furthermore, there is a tendency to rush into the details of the design without a proper understanding of the premises.

Relational multi-party collaboration challenges the traditional system by contrasting the customers’ purpose and what they want against the means (how is it done) and constraints (e.g., money, regulations, and time). Consequently, this approach helps expose the customer to alternative means of accomplishing their purposes beyond those they have previously considered and helps the customers understand the consequences of their desires. The diagram to the right summarises the differences between traditional project delivery and relational project delivery methods.

5. Strategic/Forward Thinking - Plan For Success

The expert consulting engineering firm doesn’t just do what they are asked to do. They will be proactive about educating and offering advice about alternative approaches, the risks involved in taking short cuts and the potential costs. They will partner with all parties to ensure they get the best results and be involved early in the project so that all parties can fully benefit from their expertise through valuable collaboration. In almost every case, better information provided up front will result in a more cost effective construction due to the ability to design more precisely to the conditions and not over- engineer to avoid risk.

Below is a diagram that shows the benefit of increasing the upfront planning which typically won’t cost any more than otherwise but have a significant savings in either time or money on the scope project.

Conclusion

It is clear that the proactive, collaborative approach to planning and managing construction projects creates a distinct competitive advantage and results in more projects completed on time and in budget. The difference between the expert consulting engineering firm and the average firm becomes as obvious as a competition between a professional racing team who conduct research to ensure they use the most up-to-date technology and who maintain their vehicle in premium race winning condition and strategically plan every race in advance using all the information they have gathered from previous events. This can be compared to a team who buys a vehicle, before defining the criteria relating to the use of the car, track conditions and race strategies while never conducting maintenance until things start breaking down and finally are forced to replace it when it seizes up on the track, unable to move at all.

Until now, you could be excused for operating in the traditional manner. However, now you are aware of a different, superior approach, you have a choice to make.

Your first step is to do the research. Find out how beneficial this new approach could be for your business and how much you could save by avoiding the common mistakes you are probably making by working the same way you always have.

Gamcorp is currently offering a free consultation or a preliminary design review for your next project. Gamcorp will assess your current approach and help you identify ways to save time or money or avoid unnecessary risks in your development process. Please call Gamcorp now on (03) 9543 2211 for an initial discussion or click the button below.