A lot of property developers go to builders as their last hire. Most go through a similar process: hiring an architect, bringing in some consultants to finalise documents, and then handing over work to a contractor. In many situations, however, this order is wrong. Not only can it confuse matters, but it can also lead you to exceed budgets significantly.
How development budgets can go awry
Ultimately, budgets are dependent on the designs behind them. If plans fix figures before people have tested how the building will actually come together, later variations and redesigns can dramatically add to the cost.
Interestingly, studies show that the Australian government is not immune to cost overruns. A study revealed that the government spent around A$28 billion more than they told taxpayers over a 15-year period, usually because they mentioned budgets too early.
Ultimately, plans need to be developed properly first so that everybody knows how much construction is likely to cost before it goes ahead.
What does early contractor involvement mean?
Early contractor involvement (ECI) can help significantly, which is why many developers go to an ECI construction company. The idea is for builders to join the team during the development process so they can provide input on how much specific implementations and developments are likely to cost. In many cases, they are able to provide deeper insights than architects or consultants because they live the reality every day and know the real numbers when it comes to inputs and labor costs.
This is particularly important for government procurement, where costs typically overrun significantly. In many cases, it’s not a matter of corruption, but simply an underestimation of the true costs involved in bringing a project to fruition.
How bringing in contractors early protects the numbers
Bringing in contractors early protects the numbers for several reasons. Ultimately, better project finances result when fixes to issues are identified early on. These can then be built into the overall scheme without any retrofitting or undoing work that’s already been done later on.
What’s more, talking to builders before development starts improves buildability and shortens construction timelines. Usually, ECI arrangements provide developers with a fixed lump sum before work starts, so all stakeholders have a better understanding of how much a project is likely to cost and what an overrun will actually look like.
Digital models to test the design
Modern technology is improving significantly, and many companies are now using digital models to test designs. Artificial intelligence is getting a better grasp on how much specific building projects are likely to cost based on their plans. This information can then be used by everybody involved, including construction companies, to come to a more accurate figure.
The trick, of course, is for developers to choose the right partners. They need to make sure they partner with ECI construction firms who can actually provide practical and in-depth advice during the design process. This requires them to have specialist expertise on their team. And of course, most companies don’t have that.