Project Management is People Management
The key to successful project management is to focus on managing people rather than things.
Back in the good old days prior to the GFC the market was so hot that at one stage, construction prices were rising at 1% per month! There was so much work that it was difficult to get builders to price work let alone get a competitive price. The only way the developer could get the attention they wanted was to form strong relationships with a partner builder.
Since the GFC, and now with the Corona Virus implications, the process has and is changing dramatically and builders are willing to provide cost estimates and help with structuring projects. But be careful you don’t abuse this willingness to help.
I have a preferred method for dealing with the relationship between builder and developer that divides opinion at times, but the reason it divides opinion is due to the culture and focus of the developer. There are 3 broad avenues to construction procurement –
Competitive Tender
Design & Construct
Relationship Contracting
If, as the developer, your sole focus is on achieving the lowest possible price then a competitive tender is the most appropriate form of engagement, however your risk of variations and increased management time is dependent on the quality of your consultants and the documentation they have produced. I often find that if the developers’ focus is on the lowest construction price then likely they have also taken the same approach to selecting consultants, and as such the documentation can be lacking, thus increasing variation risk.
The Design and Construct approach is a ‘hands off’ approach and involves the builder taking a project that has Planning Approval, engaging all consultants and finalising design based on a scoping document provided by the developer. This reduces the risk of variations and management time for the developer, but it increases the risk of lost specification intent. What the developer intended does not necessarily make it to the final cut and it is difficult to write a scoping document in sufficient detail to completely cover all developer intent.
My approach is to select the builder based on a different priority of selection criteria. My primary criteria is reputation, reliability, expertise, and trust. These can be intangible criteria but are also built up over time and can be judged from marketplace reputation. From this group we may seek a tender prior to the lodgment of Development Approval, on a fixed margin and prelims, and an open book subcontract tender process. The builder then becomes part of the design team and is privy to feasibility, budgets, specification, and intent from day 1, and the project is designed, massaged, and reengineered to achieve all the outcomes by identifying risk early.
I could write several pages on how this arrangement can be structured to suit different projects, but the intent remains the same. I don’t understand why the component that is approximately 75% of your total development cost, is not part of your team from the earliest possible time.
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