How to Complete a Successful Commercial Construction Project
Monday April 3, 2017
A construction project might be a multi-million dollar commercial complex, a modest residential renovation or something in between, but there are similarities in the reasons why the project is a success or failure.
At the heart of a successful outcome is a high level of collaboration between the project, construction and professional teams.
Large scale projects often contain multiple risk factors that can be divided into the following categories:
- Commercial – the funding, construction contract and leasing terms for the new building.
- Timeframes – commercial projects are usually time sensitive.
- Construction – these include variation price risk, health & safety, design, construction standards, insurance and disruption to neighbouring properties.
- Regulatory - managing compliance with the District Plan and Territorial Authority consent conditions.
How to mitigate risk
The failure to identify, allocate and manage risks can have serious consequences in construction projects.
- Identify commercial drivers from the outset - It is necessary for parties to understand and articulate their own commercial objectives, as well as understand the objectives of other parties.
- Identify the risks early - Risks which are not recognised and dealt with from the get go mean that certain parties in the construction process will have risks imposed on them that they are unable to manage.
- Good drafting - Poorly drafted, ambiguous and inconsistent contract documents can lead to project failures as parties have different understandings of terms, obligations and entitlements.
- Price expectations must be clear - Another key area of failure is unreasonable expectations around the price of construction projects.
- Produce detailed design early - Problems arise when the designs are incomplete at the front end of a project. Often a contractor will be required to tender a fixed price and methodology on the basis of designs which are little more than preliminary plans.
- Project team communication - Poor communication and inadequate project management and coordination of the works between construction parties will be detrimental to a construction project.
- Be clear on the timeframes - Most construction projects have critical timeframes which, if breached, have serious consequences to all the parties involved.
How to measure success
Each party will have its own success criteria for the project. The best way to manage the various criteria is to deal with these matters:
- Time, cost and quality - The three traditional heads of success. A project completed on time, on budget and to the quality standards agreed between the parties will go a long way to achieving a successful project.
- Relationships - A project will often be successful if parties build good relationships. This usually means that there are clear lines of communication and quick and effective means of resolving disputes.
- Compliance with standards and specifications - The works should be built in accordance with all architectural, engineering, mechanical and other specifications.
- Health and safety - Success can be measured by having good health and safety systems and no serious incidents or accidents.
- Environmental - Sustainable construction has already become a key point of differentiation among professional services and construction firms in describing successful construction projects.
- Profitable to the owner/tenants - Building owners and tenants want to achieve their value expectations in terms of the higher value of the capital asset, an improved return on rent, and/or the increased business they will achieve as a result of the upgrades.
- Functionality and use - The building needs to meet the functional and operational needs of users. This should extend to future-proofing the building to be able to cope with changing technology, ways of working and communications.
This article was written by Simon Collett. Simon is a partner specialising in the commercial property space with an emphasis on retail and office development, construction, acquisition and leasing.