The last two posts on our blog focused on the first two tenets of what we call “Do It Together” Development. The tenets are “Build Your Team Early” and “Leverage Your Team’s Talents,” respectively. The reason that we encourage developers and owners to do those things is because of our third tenet: Protect Your Time.
For a typical hotel project – wood frame, four stories, 100-rooms – the construction alone will usually take about 12 months. Traditional pre-construction timelines add about 18-24 months to the front of that. Sometimes even longer. Some projects never make it out of pre-construction.
We don’t have to tell you that, on a job site, time is money. That is a saying that is as cliche as it is absolutely true. That is why we are concerned with saving as much time as possible, without sacrificing quality. Here’s how we do it.
One main thing that we practice as much as we preach is the importance of running as many aspects of your construction project as possible at the same time. Very often, developers will run things sequentially, or one-at-a-time. Many times, it is because they didn’t follow tenets 1 and 2, and don’t have their full team in place from the beginning of the project and/or they moved forward with construction without having a final plan in place that everyone was satisfied with.
For instance, it takes a long time to secure lending after it has been applied for. Often, developers have to weigh how much financial exposure they’re willing to accept before they receive assurance from their lender that there will be funds for the project. Many times, they opt to not do anything until lending is secured. The same can also apply to municipal approvals.
But, we have found that there are many low-cost, low-risk aspects to a project that you can get started on while you are waiting on a decision from your lender, including but not limited to exterior renderings. schematic floor plans, site layout, budgeting, value engineering options, scheduling, and material considerations.
By running pre-construction processes concurrently, we can potentially shave months or even years off of your overall timeline. Read that again.
Measure Twice, Cut Once
As we have laid out in previous posts, one of the main benefits of assembling your team early is the increased amount of information sharing that occurs over the life of the project. This allows for potential obstacles to be exposed early and for creative solutions to be found. Additionally, facets of the project that might have gone overlooked or never thought of in the first place, now can be.
This all amounts to potentially enormous time savings for the project. Surprises, rework, change orders, and other delays can be all but eliminated completely when all aspects of a project are worked out in the pre-construction phase. This plows the road for a smooth and, ideally much shorter, construction phase.
The Cost of Delays
Either one, or a hundred other things can result in the delay of a project start which ultimately results in the delay of a project opening (a.k.a. earning revenue).
Say you’re building a hotel. If you want to calculate just how much time can affect your overall cost, here’s a simple formula:
Average Daily Rate x Room Count x Days Lost = Lost Revenue
So, if your hotel is going to charge $100 a night per room, and you have 100 rooms, that’s $10,000 in potential revenue lost for every day your project has to be put on hold. Now, of course, sometimes things happen that are unavoidable. Say – I don’t know – a pandemic grinds the global economy to a halt, for instance.
But, for everything else, following the first two tenets will go a long way to help you avoid the avoidable, which will save you time, and of course, money. Human error during the initial bidding process is often the culprit when it comes to delays. Sending incorrect, incomplete, or out-of-date construction documents or scopes of work out to bid can almost certainly guarantee costly adjustments down the road.
Another thing to factor into delay cost is how the price of materials and commodities tends to increase over time. We have seen, on average, a 5-10% increase in the price of things like lumber and drywall over the course of a project schedule. Keeping that schedule as short as possible will, of course, help mitigate those additional costs.
Additionally, depending on what part of the country you are developing in, changes in general conditions can add time to your schedule as well. We develop mainly in the northeast, where snow can be a factor. We have seen changes in weather add tens of thousands of dollars to the bottom line of a project. Simply put, the fewer seasons you have to contend with, the more money you save.
This is the third of four articles regarding the four tenets of Do It Yourself Development. We have discussed how putting your team together early and leveraging their talents can help you protect your time. Stay with us as we go into our fourth and final tenet, managing your project proactively.