Avoiding the Landmines
Earlier this year I sent a blog entitled “Structuring for Success” in which I identified some key steps to insuring projects are set up for success on the front end. In that I mentioned one landmine I have seen many times is someone developing an unrealistically low budget that cannot possibly support the desired program and outcome. That issue can cause significant problems, heartburn and ultimately cost substantial time and money. I have decided to dig into that issue a little deeper here.
A few years ago I got involved with a very large healthcare project with a $350 million budget that was developed during the planning phase. Working closely with the CM and the architect for several weeks we had to deliver the bad news to the Owner that the $350 million was never the right number. A realistic budget should have been more like $415 million to accomplish what they wanted. Needless to say this caused major problems as they had already borrowed money against the $350 million budget and they lost a lot of time and money reworking the scope. Several months later I asked the planning consultant who developed the initial budget and they said “We don’t know. We didn’t do it. We told the Owner we thought the budget should be higher but they did not want to believe us.”
One approach I have often recommended to clients if their governance will allow it is to not set the project budget until completion of schematic design. Along with this, engage a qualified CM to provide preconstruction services and perhaps even engage some mechanical, electrical and plumbing subcontractors for their input since their work is such a high percentage of the construction cost.
Another potential landmine can be with budgeting equipment and IT costs. People often allocate something like 40 percent of construction cost for equipment and IT and other soft costs and assume that will be good enough. This approach can be fraught with all kinds of problems. A simple example I have seen is making the assumption that existing beds in a patient unit can be reused in a new building that will open three years out. People can forget that the beds will be three years older then and they never really asked the nursing staff their opinion to begin with. We need to get the right consultants at the table early that can help develop well thought out equipment and IT strategies with suitable budgets.
Lastly, it is critical to solicit input from all of the appropriate stakeholders-facilities staff, nursing, physicians, etc. I once was involved with a project that included construction of new operating rooms and the Owner never solicited input from the anesthesiologists regarding the layout of the OR’s. The chief anesthesiologist walked the site during construction after the medical gases had been roughed in the ceilings and said that they were too close to the back wall of the OR and there was not enough room for their equipment. Multiply that issue by 15 and you have a costly mess on your hands.
These and similar issues can be avoided by mapping out a thorough planning and design process, getting the right people at the table at the right time and allotting enough time to make the necessary well informed decisions.
Happy holidays. I trust all will have a prosperous 2017!
