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By Willow Aliento
December 10, 2018
Scope creep—the bane of a builder’s existence—is capable of messing with margins, programs, and project management. Jobsite spoke to Nick Deeks, Managing Director of WT Partnership, a leading construction cost consultancy, about ways you can reduce its impact.
One of the reasons there is almost always some degree of scope creep on projects is they are often not fully and properly defined in the first place, says Deeks. That comes down to everything always being done in a rush. Since local Councils or State Government’s approval processes cannot be sped up, the client often looks to save time on the things they can control—namely, the design and early contract stages.
Getting a handle on the unknowns
Time pressures are particularly acute in the residential, commercial and healthcare project sectors. It’s all down to the fact that clients need to be able to generate revenue in the form of sales, leasing fees, or service fees as soon as possible so that they are able to keep their own balance sheets healthy.
In many projects, there is also an element of “tension between disciplines” between architects, engineering consultants, and the builder when it comes to how much time they can afford to spend on the early stage processes.
By the time the design gets to the tender stage, any risk in terms of costs or program is generally then passed onto the builder, Deeks explains. However, the simple fact the design may not be fully resolved means that builders are pricing based on a degree of unknowns.
“We see that from a cost analysis point of view,” Deeks explains. “We see tenders from four or five contractors, and they don’t look the same. There is variance all over the place.”
The challenge when tendering is a builder has to translate a partly-designed concept into what is workable and do-able, while still allowing a sufficient margin to keep their business afloat.
Once a contract is awarded and detailed design is produced, builders may unfortunately find themselves in a situation where they have to change the solution they had initially proposed to ensure an adequate profit.
“Every component [of projects] is getting squeezed, and the risk is being batted around,” Deeks says.
More time and involvement at start of project
One of the strategies that could reduce the incidence of scope creep is clients allowing for more time at the start of the design and documentation process. This means having a project 80 to 90 per cent designed at the point of going out to tender. This more detailed brief would ideally enable a bill of quantities to be produced, rather than a couple of pages of assumptions about the quantities of labour and materials required.
Early Contractor Involvement [ECI] contracts can be beneficial. They can enable the builder to undertake concurrent tasks around estimating while the design is being developed or even through the DA process.
Not having the competitive pressure of a tender can benefit the builder as well—they can put a reasonable price on the table.
Having a quantity surveyor that is independent of the builder can also help. However, Deeks says, on many projects the client often looks to save on the cost of a QS since they have someone fulfilling the role of cost planner onboard.
Deeks says for some projects, this means the builder could submit a price above budget during the tendering component and then value engineer the project afterwards to reduce costs.
Nevertheless, this can mean the QS consultants are called back on board when the builder and the client discover the actual build price isn’t what everyone thought it would be during the pre-tender or budget establishment stage.
More transparency and collaboration needed
Deeks also highlights a possible cultural change that could reduce the incidence of scope creep. He says it would require all parties involved in a project, including the developer, the builder and the subcontractors and consultants, taking an “open book” approach. If they all transparently declared costs and the profit margins require, they would be able to arrive at a fair agreement.
“But if things are not done in a collaborative fashion, someone is going to be disenfranchised,” Deeks says.
To stop scope creep from occurring entirely, a project needs to be priced at a point beyond which there will be no design changes.
“It needs a well-put-together brief,” Deeks explains. “That means taking longer [at the start] and designing the project up to 95 per cent complete prior to tendering.”
This is already standard practice in many Asian jurisdictions, he says. Projects are specified down to the details of individual air-conditioning grille types on HVAC systems and cable sizing for electrical installations before being put out for tender, Deeks says.
BIM for early-stage design
In Australia, the use of Building Information Modelling for early-stage design could be a sound tactic. The downside to this is that BIM has not become general practice as yet, even though projects for defence and health are mandating its use. In the UK, by contrast, it is mandated for use in all government projects.
To ensure costs, time and materials are all incorporated into the model, 5D or 6D Level 1 BIM use, where all key project participants are engaged with the model, is the best practice approach. It delivers the well-defined brief, reducing the odds of scope creep once shovels hit the ground.
With 5D or 6D BIM, if the architect makes a design change in the BIM model, the QS is then able to price that change more easily—the model will highlight the variation.
When bills of quantities are produced from the BIM model, all the firms tendering are pricing based on the same, precise information, Deeks explains.
Ultimately each project is dependent on client drivers, be that having the project built as quickly as possible, at the best quality possible, or in a way that achieves high-sustainability benchmarks. When a builder understands what’s driving the client, they can then have an idea of what they can approach more fluidly, in terms of either program, products, or detailed design.
If you liked this article, here are a few eBooks and webinars that you might enjoy:
Project Management Guide: Part 1- Planning
Leveraging Technology to Tame the Change Order Beast
The Future is BIM - Because Information Matters
The Full Scope of Modern Construction Management
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