Construction Costs Savings – A ‘sure fire’ way

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Here at SCM Projects, aka Subdivision & Construction Management we have proven time and again that through utilising our time trusted methods we can bring about construction costs savings. But the biggest hurdle we face is that people tend to view our services as a cost center whereas this need not be the case and frequently isn’t as we can demonstrate.

Project Management need not cost money

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We’ll keep more dollars in your wallet

 

Why is that you ask? The reasons are all tangible and real but so hard to illustrate to ‘would be developers’ starting out. They beggar belief! Their focus is mostly on containing costs and frequently Project Management is seen as just another cost center whereas it need not be so.
And that’s the ironic thing. Usually the best converts to seeing Project Management as an integral and valuable part of the development process are those who have attempted to either go it alone and / or have come unstuck in one way or another. Once rescued they suddenly see the value.

 

 

Good Project Management will lead to Construction Costs Savings

The best way to illustrate that is by giving some case study examples

construction costs savings
65 Pear St Greenslopes

Greenslopes project saves $110,000 & achieves higher quality finish:

To illustrate this point again we were appointed earlier this year to take over a small project of 4 large town houses at 65 Pear street Greenslopes, a Brisbane suburb just south of the city. The developers were an unrelated syndicate of 4 people from different parts of the country, cobbled together by their financial advisors who introduced them to the builder / promoter of the development who in turn promised them an “armchair” experience. In this case they even had a project manager though they were unaware that it was a subsidiary of the builder. Big mistake!

This syndicate signed a building contract for $1.1 M and paid a 5% deposit [[$55,000] to the builder. Having also paid him $20,000 to remove the existing house they additionally also paid him a further $40,000 to have their near level vacant site ‘cleared’ (which didn’t happen). At that point the builder (and PM) went into liquidation.

Doing the math you will see that they were in for in excess of $100,000 with little to show for it. Making things worse they had lost lots of time and the documentation available to continue was scant and needed to be revised to continue with any certainty.

Roll forward 5 months and the job is under construction with a fully specified fixed price building contract for less than $1.0 M and with better inclusions than previously. Are they in front?

Well yes they are to a degree. A substantial amount of their pain has been alleviated by that $100,000 + construction costs savings we achieved. Imagine how much better off they’d be had they appointed an independent PM from the outset. That’s the Opportunity Cost – added to the value of time lost.

This is just another example showing that the lack of competent independent PM is what really costs money.

construction costs savings
Adamson St Wooloowin before

Wooloowin Project achieves Construction Costs savings exceeding $250,000

When approached by Australian Property Investment magazine we showed how using a competent Project Manager [PM] reduced construction costs from around $1.1 M to just under $850,000 on a Wooloowin project. Pretty obviously you will realise that this saving far exceeded the PM fees by many times over. In fact is was almost by a factor of 10 times.

{if you missed it you can read it here}
What we didn’t discuss in that case study article was the cost saving relating to ‘Project Time’ and the reason we didn’t is because we didn’t actually save any time. The reason why you ask? That’s easy and it’s because we were only appointed some 20 months after our client’s first approach to us.

 

The Value of Time:

Had we been appointed then the project would have been completed much earlier and Rob would have saved even more money! He’d have saved around a year in Project Time and he’d have greater construction costs savings too as those have risen in the past year or so. These together add up to tens of thousands of dollars, but even so there’s more. There’s ‘opportunity cost’ ! If Rob had his project completed now he would be free to either sell or lease out and be freed up for another project if that was his desire. {it’s now completed – read how we recued it twice here}

 

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