What Are Project Management Costs ?
It is often simply fictitious to think of professional Project Management as a cost center. Here’s why.
Firstly, before we tell you why, let’s not confuse a Project Manager with a Construction Manager.
That’s because Construction Managers experience is usually limited to building things. They are often appointed later in a project – just prior to the construction stage – than a Project Manager. By then it’ll probably be too late to make changes regardless of their money saving merits as plans will have been approved already.
Project Managers knowledge is more wide ranging and generalised, though frequently encompassing construction management as well. They are best appointed early in the project – for best results do that at conception stage. Project Management costs generally relate to fees charged on a time spent basis or task basis or sometimes on a percentage of costs basis. So it follows then that their fees might be based on an hourly charge or a fee per service, e.g. per stage of a project such as managing the DA stage.
By appointing a Project Manager early in the development process project management costs can be minimised via the Project Manager utilising his knowledge skills and experience to seek out ways of minimising costs. Quite often those savings can exceed the project management costs. This is not a fictitious claim either. In fact sometimes the savings achieved can exceed the project management costs many times over.
Case Study – Project Management Costs = nil
Rob Swinton, the owner of the project described below in the north-side Brisbane suburb of Wooloowin would gladly attest to this claim today but back in 2013 it was a different story.
Here’s his story.
You see, back in 2013 when Rob first approached us he decided that project management costs were a cost that he could do without so decided not to engage us – he’d go it alone.
About a year later, having found the going a bit tough, he approached us again and we again discussed things and again provided him with our fee proposal and scope of work. After some deliberation he once again decided to go it alone.
Roll forward to 2015 and he came back to us with much the same questions although he had made some progress in the meantime. He’d been busy – very busy in fact – gaining DA approvals, organising plans and arranging quotes even, but he just couldn’t get it to work either physically or at a feasible price.
If you drove past Rob’s leafy corner site back then you would have seen a character home with seemingly very little room for anything else. Understanding that the character home had to remain you would be left scratching your head wondering how on earth one could retain the house and the pool and fit 2 new townhouses. Well scratch no more because that’s what has since happened.
Rob’s project involved picking the house up and moving it within the site, demolishing and dumping all the under structure, partial demolition of the house, some renovation of the remainder as well, rebuilding under it in its new location as well as building the two new townhouses, landscaping and fencing.
What Project Cost savings did we make ?
We made some changes to his plans, carefully avoiding the need to require changes to his DA, where we identified that we could to save money without detracting from the end product. We also re-arranged other pertinent documentation and broke the works up into component parts.
All Robs previous contractors were quoting around the $1.1M mark with quite a few PC items listed at unrealistically low prices.
Our final accepted price – all fully quoted and documented with a fixed price contract – just under $850,000. That’s a saving around $250,000. Those changes we made probably accounted for $60,000 of that – the rest? Put it down to our systems and ‘know how’.
Our fee? Little more than 10% of the savings achieved to take it all the way to completion and that’s why Rob would now agree that Project Management costs can be nil. Read in Rob’s own words what he had to say in ‘Townhouse project rescued twice”