Over the last decade, the United States construction industry has certainly begun to increasingly embrace cost management services as clients become more familiar with the value created by having a cost consultant as part of the project team.
Elsewhere around the world, a cost consultant or Quantity Surveyor (QS) is as common a requirement as an Architect, however, in the US, cost has typically fallen under the Project Manager’s scope. It’s no surprise that when you assign the cost duties to a dedicated specialist, the overall outcome is often more optimal, as with less duties, the Project Manager can focus more on other critical issues under their purview, with dedicated support from their cost specialist solely looking after the cost.
In the US, there is also an over-reliance on the General Contractor or Construction Manager for cost information, however, this can be counter intuitive as commercially, there is a high likelihood that they will put their interests ahead of the client and so an independent and second opinion can be extremely valuable given the capital at stake in many construction projects.
There are particular areas where Cost Consultants and Quantity Surveyors can add significant value.
Preconstruction: How much is this going to cost?
The answer to this question is primarily why you would engage a cost consultant. A cost consultant can be engaged and assemble a cost model or estimate and give you an accurate proposal of what you project will cost. Not only will a cost consultant provide you the construction cost, but they will also provide a complete project cost including soft costs, FFE, Technology and professional costs amongst others.
The value created here, is ensuring a project starts with the correct budget. Far too many projects begin with over ambitious budgets and lack of forethought on what needs to be accounted for in the budget and this creates serious challenges further in to the project lifecycle.
Value creation: Cost avoidance – cost risk reduction and mitigation.
Bidding procurement
Implementing a robust and structured process for the procurement of services on a construction project can produce significant value and buy in as well as providing the necessary governance and compliance around the award of contracts. Cost Managers and Quantity Surveyors are adept at installing industry best practices for procuring services, materials and labor.
Whether it be a thorough RFQ and RFP process or a detailed leveling exercise, a Cost Manager can drive real tangible benefits, ensuring best value is achieved and cost risk is mitigated. The low bid is not always the right bid and diligent leveling and review will help weight risks, curtail costs and guards against more expensive change orders further in the project and enhances the competitive aspect of bidding work for the best value outcome.
Value creation: Best value achieved through robust, compliant bid process administration.
Cost management: If you can’t measure it, you can’t improve it
This adage can also be applied when managing costs on a construction project. In order to have the ability to impact the outcome, you have to be on top of the costs and have a process for managing every transaction. Having this visibility is critical to managing a project proactively, with accurate forecasting and contingency management. This allows the project to be tracked against budget and promotes the management of risks and their mitigation positioning the project for financial success.
Value creation: Accurately forecast cost, track & mitigate risks, reduce costs.
Change order review
Change orders present a huge opportunity for value creation. Having a cost expert by your side allows you to challenge the validity of change orders and Cost Managers are skilled in quantifying and assessing the real impact of changes and negotiating with the general contractor/construction manager. On a project with a value of $100m you would typically allocate 3-5% for change orders, so $3-$5m dollars could be in the balance. Through review and negotiation, even reducing this exposure by 10% could equate to $300k-$500k which represents a huge value proposition versus the cost of the service.
Value creation: Limits cost exposure and reduces spend against contingency.
Elevate your project outcomes with cost management expertise
These are just four areas of the Cost Management spectrum that provide value but there are many other ways a Cost Manager/Quantity Surveyor can keep capital on the client’s side of the table and clear the best path to a successful project.
The question is, why are you not engaging a quantity surveyor?
