Product category:
Surveyors and consultants
News Release from: EC Harris | Subject: Construction projects and tendering process
Edited by the Buildingtalk Editorial
Team on 27 March 2007
Managing the costs of construction
EC Harris discuss how the last twenty years have seen significant changes in the way that construction projects and the tendering process are managed.
The importance of effective project management has never been higher Spiralling construction costs, fuelled by the shortage of skilled labour, interest rates and price increases of raw materials is continuing to place more emphasis on the role of effective project management
This article was originally published on Buildingtalk on 21 Jan 2005 at 8.00am (UK)
Related stories
Report into high rise buildings
High-rise residential towers are rapidly becoming a developing feature of the property market across the UK says a report by Knight Frank and EC Harris.
Record output for the residential market
The prospects for the private residential market across Europe are positive, according to leading international consultants EC Harris.
But as Colin Lord, North West Property Sector leader at EC Harris, points out, the last twenty years have seen significant changes in the way that construction projects and the tendering process are managed.
"Fragmented approaches have given way to the provision of an integrated project management style that delivers construction projects to required standards of time, cost and quality.
The technical complexities of modern buildings and the demands of client organisations now require an increasingly sophisticated service from project managers.
Further reading
EC Harris project managers for Enfield Academy
EC Harris has confirmed its partnership with the Oasis Trust for the construction of their flagship Enfield Academy in London.
EC Harris helps launch B and Q Hong Kong
EC Harris is playing a major role in the opening of B and Q Asia's first-ever store aimed at the home improvement market in Hong Kong.
EC Harris scores hat trick of wins
EC Harris is celebrating after being crowned as Commercial Services Company of the Year for the third year running.
"Keeping tighter controls on the costs of construction represents one of the most challenging areas within the industry.
In particular, getting the numbers right from day one and maintaining financial controls on GBPmulti-million schemes without compromising quality or specification is a complex business, requiring vast technical skill and proven expertise", he explained.
Cost estimation is one of the most important steps in project management as it establishes the base line of the project cost at different stages of the project's development.
Interest rate hikes, fluctuating raw material costs, labour shortages, adverse weather conditions, as well as the inevitable unforeseen problems that arise particularly during the construction of large-scale regeneration programmes, mean there are so many anomalies, which have to be factored into cost estimates.
Procurement through a two-stage process therefore offers a more flexible approach and can lead to time and cost savings.
With partnering principles being much more favoured by the industry there is also a move to an open-book approach to the tendering of subcontracts, as this limits the inclusion of extra costs in the second stage tender.
A key issue faced by developers is to encourage contractors to switch from a low-risk, fee plus cost-reimbursable basis to a fixed cost and time sensitive contract with the design and construction risk being adopted by the contractor.
As Colin Lord explained: "Open-book accounting is now being used more frequently in the construction industry and is a common feature of partnering agreements.
"Essentially it represents a sign of mutual trust between the developer and contractor, but is not without its potential difficulties, and is definitely not an easy option, requiring careful and skilful management.
"Important aspects involve understanding the contractor's cost systems and accounting procedures, not to mention agreeing the definition of 'actual cost'.
Putting the right audit strategy in place which meets the requirements of the project and cash flow forecasts is another major consideration," he said.
The benefits are considerable and provide the developer with a greater cost certainty and more detailed understanding of the cost base, in addition to helping to establish cost saving strategies and improving cash flow.
This means there are clear advantages to having the project management team on board from an early stage.
Effective project management is central not only to project performance, but also to providing high quality pre-construction phase services and introducing alternative procurement strategies.
As increasingly public sector investment is no longer available to large scale projects in the city, managing the market risks associated with construction cost escalation issues is critical to attracting investment and makes having the right expertise on board a fundamental consideration.
• EC Harris: contact details and other news
• Email this article to a colleague
• Register for the free Buildingtalk email newsletter
• Buildingtalk Home Page
Search the Pro-Talk network of sites
