How to manage your construction project while staying in business
You might think that managing your construction project begins when you innovate. However, this is a serious mistake, leaving you vulnerable to an out of control project. The decision to build or renovate should be based on a practical analysis of the projected income generated based on the services offered at a certain level. A percentage of this forecast income will then be allocated to a mortgage payment, which will establish the initial budget for your project. This budget determines how much building, site, and equipment you can purchase for your project. Next is the overall management of your project, which is made up of many elements taking place in a logical sequence that I call the “project schedule”. To help you, I’ve organized each step into a series of phases.
During this phase, you will select your project team, establish your project goals and objectives, analyze your needs, finalize your site selection, detail a budget, and develop a timeline with critical milestones. One of your first decisions is to choose an architect. Based on their level of experience with veterinary facilities, the architect will help you get approval for your municipal site plan, your first “license”. You should also study and select your financing option and develop your budget for practice-centric expenses like computer systems, signage, furnishings, equipment, and interest charges during construction.
A potentially decisive decision is the selection of the site. Once you’ve confirmed the demographics and size, the next hurdle is zoning. Sites not zoned for veterinary use will result in a long and tedious effort to get a deviation or change. Success is never guaranteed. You must retain the services of a surveyor and civil engineer to develop preliminary site layout drawings, including grading and drainage, building location, setbacks, parking lot layout , utility connections, location of garbage cans and any landscaping, fencing or walls required. Along with these efforts, there must be a geotechnical analysis consisting of drilling and testing of the soil to determine the bearing capacity of the soil for the design of the foundations. Poor soils result in expensive foundations that can exceed the cost of the site itself. Contingencies placed in your offer to purchase may allow you to cancel the purchase if any of these conditions are discovered, allowing you to locate an alternative site with minimal losses.
During this phase, your job is to review the design solutions of your team of architects / engineers and provide them with guidelines to complete the design to your satisfaction. During the process, remember that the success of your practice is in large part the result of your unique practice culture. You need to protect your culture with every design decision.
You will also begin a more detailed list of each piece of equipment to be incorporated into the design. It is essential to make equipment selections early and not to modify them. Each specific manufacturer has different dimensions, clearances and infrastructure requirements. New changes or waiting too long can increase the risk of installation problems resulting in costly change orders.
It is important to decide now which construction delivery system to use. Each system has different requirements in terms of designs, financial distribution and involvement of contractors from this phase. They also have different advantages and disadvantages to consider:
- Negotiated contract: Often best used in renovations, the architect prepares preliminary design drawings from which selected contractors prepare construction budgets. The owner and architect review them with each contractor, and the contractor deemed best suited is selected. The contractor’s job is to be part of the team as the designs evolve to completion, offering feedback to keep the work within their original budget projection.
- Design-offer: The architect and engineers prepare detailed construction / permit drawings and invite contractors to submit competitive bids based on the drawings. Typically, the lowest bidder is selected for construction. You will receive the final cost of construction once the design is complete and bids are submitted. Bids over budget may result in project reductions or additional borrowing.
- Design-build: The architect and contractor are one team, offering both design and construction for a fixed price set by your budget. For predictable quality results, previous veterinary experience is crucial. A huge advantage is knowing the construction cost from the start of the project.
Construction document / permit phase
The architect and engineers will now prepare and submit all documents and drawings required for the building permit in order to obtain the contractor’s final price for the construction. Your job is to familiarize yourself with all the designs: architectural, structural, heating / cooling, plumbing, power and lighting, and interior design. Your team should walk you through them. Remember, if it’s not on the drawings, you don’t get it. Contractors are only required to provide what is in the drawings.
You must also finalize your construction loan. This is an interest-only loan used to pay the contractor while they are working on the building. The principal will be incorporated into your permanent mortgage at the end of the project, but the interest will be due each month on the current balance of distributed funds. It is essential that you budget for these interest charges.
The construction phase
Once you have retained a contractor, your primary responsibilities are to understand and meet specific payment terms, review and approve bids or material / color substitutions, oversee on-time delivery of the equipment supplied by the owner and review the contractor’s monthly payment requests. Here are some key terms to familiarize yourself with:
- Table of values: This is a detailed list of each work item, its total contract value and the amount that has been paid to date.
- Project schedule: This is a bar graph showing the entire duration of the project, including the time each subcontractor has to complete their trade, from start to finish.
- Payment request: Usually submitted on Form AIA G702, a payment request shows the total contract value, payments made to date, and payment due that month. The contractor, owner and architect must each sign this document for the bank to issue a payment
- Detention : This is an amount of funds (typically 5%) withheld from each payroll request until final payment, for your financial protection.
- Privilege releases: Each subcontractor must provide a lien release form with monthly payment requests stating that it has been paid and waive any lien rights for payment disputes.
- Change orders: Change orders authorize a change in the contract amount for work to be added or deleted. Change order requests must be preceded by a request for proposal from the owner, or contractor, requesting the change. Once approved, the change request form can be processed and signed by the owner, contractor and architect.
- Punching list: When the contractor has substantially finished, the architect prepares a list of missing items, or a list of points, to be corrected before final payment.
- Occupancy certificate: Following the successful completion of all municipal inspections, the municipality will issue an occupancy certificate allowing the use of the building.
Manage your time
Can your practice afford to lose 40-60% of your personal productivity in the time it takes to build your building? To avoid this loss of income, delegation is a necessity. If not you, then who should handle the tedious daily tasks of managing the project? You could hire the services of an outside construction manager who can provide construction knowledge but will not understand the nuances of you or your practice. This can and has resulted in decisions on site which are not always the best for the practice or the project.
A more favorable option is to delegate project management to someone who understands the practice (for example, a practice director, practice administrator, or chief technician). The architect can supplement this project manager’s practical knowledge with his knowledge of construction to ensure that everything is going well while the firm is still operating. This keeps you in production and informed about the project, and you will always be the final decision maker on all matters. Using your design team and a project manager allows you to keep the practice and the project at the highest level.
Wayne Usiak founded BDA Architecture in 1986 to specialize exclusively in the design of animal installations. In 1998, he formed their sister company CMP Construction to provide construction services to their designer clients. More than 900 installations have been completed to date.