Managing Expectations through Project Managers

I am often asked, in conversation or when interviewing for a project, how our firm goes about the operation of constructing a project. After discussing the roles of project manager, superintendent, foreman, etc, I am invariably asked, as the manager of the construction business, what my role is in the operation of constructing individual projects.

With quite a few years now in the business playing just about every role along the way, I have come to the successful conclusion that my role is to play that of the client or client’s advocate.

When it comes to successfully building residential estates of the highest caliber it is imperative that job one is to manage the expectations of the client at all times. The construction business is fraught with endless chances for misunderstanding and monetary loss by the contractor, so the construction staff is trained to protect the business’s shareholders. This is necessary to the survival of the business. However, the vigilant protection of the company does not guaranty a happy client or design professional -- or even that their expectations are managed correctly.

This is where I come in.

As the operations manager or “manager of the project managers,” I look at every issue as if I am the homeowner or design professional. What would I think if I were being presented with this proposal or request for information? Is this something I should be paying for? How will this affect the schedule? Is this what I am expecting?

Don’t misunderstand, our project managers and superintendents are highly experienced, capable, and extremely sensitive to the wants and needs of our clients and design counterparts. However there are times when client expectations collide with that of the general contractor.

The tendency of the project manager is to strive to build extreme quality within budget and schedule. When there is a change causing extension of budget and schedule to provide for the extreme quality it is up to the operations manager to scrutinize these situations so that fairness to the client is maintained. At times this creates confrontation and then compromise within the office prior to releasing information to the client. Compromise might include eating some costs that might otherwise have been imposed improperly onto the client. It also might mean coming to the conclusion that due to certain documentation, our take on the situation is correct and the client must bare the brunt. In the latter case, some explanation from me directly with client could come in handy to explain the situation or reason for our course of action. There we go managing expectations again.

Performing the tasks required by the client in the process of constructing a building is every bit as important to the outcome as the performance of the project manager. In our market segment, that of the very high quality estate home, most clients act in this capacity few, if only one time. How can we expect them to make the right decisions or understand the point of view of the contractor without any experience? Having been a client myself, who has also acted as a professional client representative on large estate projects, I have a pretty good understanding of the contractor/client relationship. I believe having the ability to view the process from a client’s perspective and using it as a tool to manage client expectations sets our firm apart when it comes to client retention and referral.

De-Selecting a Sub

I once attended a forum sponsored by CSI (Construction Specification Institute) where one of the topics was Contractor/Subcontractor relations. There were several executives of large General Contractors in attendance. When prompted on the subject, one of the panel members, Jim Balboni, an executive with Otis Elevator, stood up on his chair and shouted, “Why in the hell do contractors continually use subcontractors that fail them!” In the best humor there is always some truth.

The General Contractor/Subcontractor relationship is, for better or worse, a telltale of project health or for that matter Contractor health. A great subcontractor makes the job of the General less time-consuming and allows him more time to plan and budget and thus makes the General look good. A poor subcontractor bogs all facets relating to his portion of the project down and can make the project and the GC look like a disaster.

In order to truly represent the interests of the client, the subcontractor list must constantly evolve. Great subcontracting companies come and go. So by simultaneously trimming the potential subs-list and adding to it constantly, you are adding extreme value to your relationships with clients. Pricing will be competitive and current. Technique and communication will be modern. Trust will be there.

That is not to say that all subcontractors must go. We have several that we have worked with for more than 20 years and continually stand the reasonableness test.

Disengaging from a subcontractor prior to contracting for a project

As with any relationship, until we have experienced a project together, we really do not know each other. A Subcontractor who violates the basics needs to be let go before they start for

• Improper insurance
• Disagreement with our indemnity language in our subcontract agreement
• Expired license
• Poor or non-existent references
• No office presence where phone calls, (e)mail and faxes are received, messages taken and phone calls, (e)mail and faxes returned.
• A misunderstanding of the management necessary for the very high caliber building process

If a subcontractor fails in any of these or you get the gut feeling that you’ll be let down, pass early and often. Experienced Generals know the feeling.

Eliminating a subcontractor from the proposal list

Now that we have experienced a project together, besides pricing, what makes us know the Subcontractor should not be considered for the next team effort:

• Poor product installation
• Offers no consultation in trade
• Improperly handles client/GC relationship
• Improperly handles architect/GC relationship
• Continuously late, inaccurate billings on improper form
• Does not understands the key rule that additional or extra work will not be paid for unless approved prior to work being completed
• Maintains a slovenly jobsite environment
• Add your own here

There is some give and take with this list. A subcontracting field with a small number of competent competitors might warrant a little leeway on a few of the above items. There might be some give and take for a rock-star that does very fine work. However, if a few of the above are tied together, even the best subcontractor is expendable.

The bottom line is that the GC needs to pull off the project on time and within budget and make the experience for the client worth reliving. If a subcontractor isn't doing his part to contribute to that smile on the Client's face, perhaps their place on the subs-list should be reconsidered.

Going Green, Saving Green

I am amazed why there are not more people going solar.  Anyway you look at it and at any order of magnitude, for residential electricity users, the incentive situation creates a “no-brainer”.

We were recently contracted by an existing client to install a 40 kw solar generation system on a remote location of their residential property.    The system will generate enough electricity to achieve a net zero consumption with the local utility over an aggregated year of use.  Excess power generated during the day and especially summer days will spin the meter backward allowing electricity onto the grid and balance with excess consumption during the night and especially winter months when days are short.

The thing driving the installation lies in current state and federal incentives. The feds allowed for a 30% of system installation federal tax credit with a cap of $2000 until January 1, 2009.  Beginning this year, the cap was lifted and the credit became unlimited. In addition, the California Public Utilities Commission (CPUC) pays an incentive of $0.22 per kwh generated for the first five years of generation.

 The combination of the two incentives creates a reduction in the cost to the home owner and even with projected energy cost increases, the new system will pay for itself in 8.5 years. From that point forward, the client will generate cost-free power for 16.5 years for at least the 16.5 remaining years on the 25 year solar system warranty.

 It is a no-brainer.   But if you decide to install this kind of system, make sure that your contractor has experience and knowledge of how you can make the most of your new investment.

Contractor Selection is Key

Very few things in life are more stressful than home construction or remodeling.  Everyone has heard contractor horror stories – delays, poor workmanship, unexplained costs.  Unfortunately, there is no “homeowners bill-of-rights” when it comes to contractors.  Therefore, consumers have to trust their friends and trust their gut when it comes to choosing a builder.

           

Many people have buyer’s remorse after it is too late to stop a project.  So what are the appropriate questions you should ask a potential contractor?  How do you do due-diligence to ensure that the people that will be in your home and in your face for the next several months are a good fit for your project and your life?

           

Here are a few suggestions you may want to follow before you begin the building adventure of a lifetime:

 

Have the contractor on-board early in the process: 

All facets of a complex project tend to become even more involved once construction begins. Get your contractor assigned to the team early enough so they become an integral part of the process, and to reduce the number of surprises after construction begins.  Budgeting at various stages of preconstruction with common-sense building strategies can assure that you are getting what you want without compromising later.

 

How do I research and select the contractor that is right for my project? 

Finding a contractor is preliminary to selecting a contractor but an important step in the process. Assembling that list of contractors to discuss a potential union requires some research. Investigate sites on-line such as Yelp or Angie’s List, call on friends or neighbors that have done recent building and consult with your design team on possible contractors. All the while, focus on referrals that have done projects of similar size and complexity. The style of the home is of less consequence than difficulty and quality level.

 

Once you have some or one potential contractor, move along to the interview process to see if there is a fit. Topics to consider:

 

References, References, References:

When discussing your project with potential contractors be sure to collect a list of references with whom you will be able to call and discuss qualifications. Most clients of large, estate-type homes may not allow contractors to show their homes to potential clients and that is understandable. However, they or their representatives will likely easily discuss the experience they had with you over the phone. It is important once again to gauge the size and complexity of the project in order to compare the experience that the reference had with the experience you are expecting. 

 

Consider LOCAL experience:

In places like San Francisco, where neighbor input, view obstruction and permitting issues often become hair-raising, having a builder on board who has experience in the City can make a big difference. Other municipalities may not have such constraints but using a contractor that operates in your general area will assure that he knows the pool of local subcontractors and is familiar with the construction norms of that area.

 

Company longevity is important:

A contractor who has been through various building cycles can be a better predictor of outcomes. Having some time in a referral-based business means loads of feedback from existing clients on how their design decisions have panned out and how products have fared. In addition, most tenured building executives have built several homes for themselves or done some speculative building so have the ability to look at things from an owner’s perspective.

 

Project and Field Management:

Let’s face it,  no matter who you contract with, you need to know who is actually building or remodeling your home? The management team is the single most important facet of what your contractor is offering. This team will be the driver of Quality Control, Schedule and Cost Management. When interviewing your potential contractor, ask about the project manager and/or field superintendent that will be slated to run your project. What qualifications do they possess? How long have they been with the company? Will they be running more than one project at a time? Once the contractor has been selected and the preconstruction phase is underway, it is important to meet and establish rapport with this team. The relationship is priceless.

 

Who takes ultimate responsibility?

A valuable contractor will generally be performing multiple projects at all times. Each project, large and small, should have a management team in place whether full or part time depending on size and complexity. That team answers to the owner of the company or in larger firms, an operations manager. This manager takes ultimate responsibility within the firm based on the terms of the contract and should act as an advocate for the client when assessing the interim health of the project or as hard decisions arise. By avoiding contractors where the owner or operations manager is also the project manager you ensure a healthier chain of command and a single point of reference for managing expectations.

 

Insurance & Indemnity

From a legal point of view, construction liability boils down to two issues: insurance and indemnity.

The contractor must be fully insured with a top-rated liability insurance carrier, and name the company owner as additional insured. A proper indemnity clause guarantees that the contractor will compensate for any damage or loss sustained. Make sure that these two critical issues are understood by your contractor and a part of any agreement.

 

Contract Types

There are many deviations to two standard contract types; Fixed Price and Cost Plus.

A Fixed Price contract is commonly used by owners attempting to lock in a low price. Pitfalls with this arrangement are numerous. Contract documents need to be complete and understood thoroughly by the Owner. Markups are generally hidden making comparisons difficult. Fixed Price contracts generally assure an adversarial relationship between Owner and Contractor going forward.

Cost Plus contracts with negotiated terms lend to a team approach to building. Your contractor should be a service provider making firm deals with subcontractors, suppliers and labor while coordinating all facets into a finished product. Paying a percentage fee for this service and insisting on complete transparency into the process including auditing the books upon completion will ensure you get what you pay for. For a Cost Plus contract to work, you need an experienced, reputable contractor; (Remember those references?)

 

Understanding of Budget vs. Quality vs. Schedule

It is fairly cliché in the industry but having a firm grasp on the basic construction triangle is a key to understanding how the process works. The triangle consists of budget, quality and schedule. If a low budget is the priority, top quality and a fast-paced schedule may have to be sacrificed to an extent. Conversely, if top quality or unusual finishes are of utmost importance, the budget and/or schedule will need to be extended. Any number of combinations can occur, all causing the push and pull of the triangle. Understanding these relationships and better yet, feeling confident that your contractor understands these relationships help a great deal in fulfilling your wants and needs in a newly constructed home.