Savings and Risks in Fast-Tracked Construction

Last time I wrote, we talked about owners’ adjusted expectations of the building process when fast-tracking a construction project. What, exactly, accounts for the potential money savings in a fast-tracked process?

A building that is fast-tracked by adding workers to the project, working overtime or working outside in adverse weather conditions (such as through the winter months) may well end up costing more. These are situations associated with a project that has fallen behind schedule and on which the contractors are playing catch-up. However, for properly handled fast-tracked projects, where a shorter schedule is a result of pre-construction planning, savings can accrue by limiting overhead costs for the firms involved in completing the project and leading to more-generous financing terms. Also, depending on the circumstances in the broader economy, a shorter schedule can also ease the impact of inflation on the overall project budget.

Author Oliver Snider is the director of business development for the design-build firm Stanmar Inc.

Some delivery methods even do away with that last concern altogether. Stanmar, for example, works under a guaranteed fixed price, meaning that regardless of whether the price of raw materials, equipment or other building components rise during the project, the building owner is shielded from that risk. Firms that work under a guaranteed maximum price, a similar-sounding contract with very different terms, can sometimes return savings from cost underruns (should they occur) to the owner, but this type of arrangement comes with an added risk — arguments over the scope of work covered by the contract can occur because the building’s design was incomplete when the contract was executed. As with a traditional design-bid-build arrangement, that argument can stall even the fastest of fast-tracked projects and, if the price isn’t guaranteed, subject the owner to the risk of resulting cost overruns.

In other words, fast-tracking a building project can lower costs, but won’t necessarily if there is no guarantee, contractually speaking. This is an often poorly understood concept with regard to the building trades, but so long as the owner is the party at risk of cost overruns, uncertainty hovers over the final project budget, even if the schedule has been trimmed from 18 months down to 12.

This is the largest drawback of the design-bid-build approach, and the primary reason that collaborative methods such as design-build are currently enjoying a Renaissance. More owners are entering into building projects demanding cost accountability and/or cost certainty, and questioning processes that leave them at risk of a ballooning final project cost. There is a certain sense of security that comes with the standard approach, where the process starts and stops while you complete your financing and settle on a final building plan and design; you’re in the hands of a designer who is both an artist and is experienced with large, complicated building projects. But your architect doesn’t assume any risk. It is the actual lack of security this process provides that is driving more institutions toward methods that can control cost and risk, while still meeting programmatic needs and providing aesthetic quality.

Owners turn to fast-track processes because they need their building to be completed quickly and because they’ve heard of the cost savings associated with them. But unless they know whether they are contractually free of risk, those cost savings may turn out to be an illusion.

MORE FROM OLIVER SNIDER:
How to Keep Costly 'Scope Creep' at Bay When Building
Extreme Makeover: Small College Edition

Oliver Snider ([email protected]) is director of business development for Stanmar Inc., a Wayland, Mass.-based design-build firm specializing in multipurpose athletic facilities.