June 9, 2022

Picking the best construction strategy

You’ve found your property and an architect, and you’ve done your surveys. Now it’s time to start thinking about a construction strategy

Summary

Here are the most common construction strategies:

  • Single trade tendering
  • General Contractor who handles everything
  • General Contractor to handle construction and an architect to handle design
  • LEAN approach

A professional should evaluate which strategy is the best fit for each unique project. Each strategy has its (dis)advantages, and making the wrong choice can cost you a lot of stress and money.

What is a construction strategy anyway?

A construction strategy describes how you are going to handle your construction project. This article highlights the organisational aspect in particular. As you’ve just read, there are multiple options, which we will describe in detail.

Construction projects can be handled in multiple different ways. If you don’t know which is the best fit for your organisation, you are in danger of being taken for a ride by your architect or construction company.

For example, it may be in the architect’s best interest to recommend that you tender the works on separate trades, as that will increase his management fees. A construction company may advise you to opt for the general contractor option, so they can keep control of the process and maximise their profits.

Is there a one-SIZE-fits-all solution?

Unfortunately, there isn’t. The best strategy depends on the location, the economic situation, the way your organisation is set up, and many other factors. That’s why we always conduct a thorough analysis of the organisation, the project, and the external factors when we consult for our clients. The time spent on this process is well invested.

Which strategies are there?

I’m a big fan of keeping things simple, so I’ll explain the most common strategies, but be aware that there are many others.

The most common options:

  • Single trade tendering
  • General Contractor who handles everything
  • General Contractor to handle construction and an architect to handle design
  • LEAN approach

You may think, “Where does the project manager come into it?” But we [E1] are there from the very beginning, and we oversee everyone involved. We stand by our client’s side to create an objective strategy, pick the right partners, and oversee the works to ensure the construction project is completed successfully.

As an objective third party, we ensure the client gets the best possible solution to suit their project. A project manager consults his/her clients and does most of the legwork, meaning that the client is still in control, but 99% of the tasks are carried out by the project management company.

Now, let’s dive into the different strategies…

Single Trade tendering

Single trade tendering means picking a separate company for each trade. The architect, engineers, and construction companies are all tendered separately. This may involve creating contracts and agreements with dozens of different companies. It also means you’ll be receiving multiple invoices from dozens of different companies. In addition, the responsibility for coordinating all their efforts lies with you, the client. For this reason, the client will often engage an outside project management company to handle the task. But even an experienced project management company can reach its limit if it is not set up for in the right way. 

The reason this method is popular is that it is cheap (in the beginning), but it is also very tricky. In the beginning, as mentioned, everything is fine; however, if costly mistakes are made, each company will point at the client as the party that should have properly coordinated and distributed the enormous information flow. During the construction project, the number of discussions, as well as the costs, will likely increase. The administrative workload is also substantial as it involves dozens of companies with their various contracts, invoices, warranties, questions, and so on.

During construction, you’ll need someone to handle site management, as the companies are not going to coordinate the works themselves. Sometimes a construction site can seem like a day-care nursery; you’ll need people who can resolve conflicts, handle logistics, check quality, and solve day-to-day problems.

In short, the single trade method is cheaper in the beginning, but often turns out much costlier than expected during construction.   

General contractor who also handles design

Let’s say you want one partner who can handle everything for you – from the very first design to the handover. In that case, what you want is a general contractor, who will get a functional description of the building from you.

This general contractor will most likely look for subcontractors to handle the work. So, they’ll find an architect, the necessary engineers, and all the different small contractors to execute the works. They’ll estimate the costs (with an added buffer) and they’ll add 10%–15% on top to ensure their profit margin.

The benefit of this method is that you have minor organisational work and it’s easier to hold the contractor responsible for mistakes, as they are managing everything.

The disadvantages include the higher costs, their incentive to use the cheapest materials to save costs, and the fact that you are dependent on this single contractor. Even if they don’t do things the way you’d like them to, you’re stuck with them. Unfortunately, contractors often end up taking advantage of this position.

General contractor + Architect

Let’s say you don’t want to opt for single trade tendering because your organisation is not set up for it, but you don’t want to entrust the entire project to one company either, as this seems like too great a risk. In that case, a split might be a good fit. Personally, I like this method – it minimizes organisational work and risks but keeps the client in control.

The clients’ project manager oversees the architect, who, ideally, also takes responsibility for all the specialized engineering works, i.e., fire protection, structural engineering, HVAC engineering, and so on. The architect will add 10%–15% for his/her troubles. Once the architect has submitted the permit designs, you have the option to also award them the detailed design or to enlist a general contractor to handle the detailed design as well as the construction. Instead of a single general contractor, you also have the option to work with multiple general contractors who each handle a portion of the works, i.e., HVAC and Core & Shell.

The advantage of this method is more control.

The greatest risk of conflict occurs when the contractor sees the designs for the first time. If the contractor finds a lot of mistakes or believes the design needs to be changed, you’ll already be far into the design process. Likely the building permit has already been granted or is in the process of being approved, meaning that changes are not easily made and can turn out to be costly.

Therefore professional project management is highly recommendable.

LEAN Approach

While this approach has been implemented by a large number of companies in various sectors, I have to admit that the construction sector is very traditional. In Germany in particular, this method is not yet well known, and contractors are often sceptical, although it can be a very interesting option for all parties.

What is LEAN in the construction context? Simply put, you get all the various parties around the table at the very start of the project. You introduce the designs, and the budget is laid out openly. This way, the architects and construction companies have a common goal to work towards. They will create a design that fits the budget, and often they’ll get a bonus if they can complete the project within budget.

This method ensures that everybody is on the same page concerning the project. Solutions and improvements can be found at a stage where any changes will not yet be costly, and as an added benefit, you will have much more cost certainty.

Conclusion

As you can see there is no one-size-fits-all solution. Reflect on your organisation’s capacities and skills. Consider the external factors involved, and then decide on a strategy. If you are uncertain, seek out a professional company to get their advice, as the success of this phase will have a major impact on the success of your project.

Up next…

Surveys to carry out when acquiring property.

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