By Jeff Carter, DDS, and Pat Carter, IIDA
Every project has a defined budget (or at least should have) and the accompanying client expectation that their project be completed within that budget. This expectation is appropriate, even if the construction process is fraught with challenges that impact that agreed-upon budget. This is a primary reason we stress the importance of engaging an experienced team -- designer, dental equipment specialist, general contractor (GC) -- to work collaboratively through project issues and still deliver on that expectation. It is also why we are identifying actions taken by recent clients who learned how they unwittingly added cost to their projects.
1. Negating the NEGOTIATION. We have consistently promoted the VALUE for the COST advantage of working with a selected GC to negotiate the final cost of your project prior to the start of construction. This process involves review of subcontractor pricing, which the GC, design team, and client evaluate for their cost value to the project and by elimination or modification can become options for reducing the project's overall cost. Once completed, the project's cost is fixed and construction begins based on what is "in" or "out" via this negotiation. This also becomes the scope of work managed by your design/construction team to completion within the budget.
UNFORTUNATELY…
A client who viewed the cost savings negotiated as an opportunity to "add back" during construction was surprised when these "reinserted" at a cost premium. "Add backs" are a "change to the agreed scope of work" which can involve redraw by design, reprice by subcontractors, and change order paperwork by the GC, all of which adds more dollars than if it were included in the project initially.
Our counsel: Commit to your budget and stick with your negotiated scope of work. If there are items you wish to add, define and negotiate those in a separate contract. If, however, the "add" must be done during ongoing construction, then understand that your "add back" can generate cost at a premium to your project.
2. Your CONTINGENCY isn't a "cookie jar." Lenders typically require a construction contingency (additional dollars) beyond the agreed constructed cost of your project. This is designated for unknown costs that can arise in any project. Example: A recent project was impacted by local interpretation of the ADA restroom. It required moving an installed sink farther from the installed toilet. This circumstance occurred irrespective of ADA approval at time of permit when the final plumbing inspection failed due to a newly adopted ADA regulation. The cost to move the fixture was, therefore, an unknown cost incurred.
UNFORTUNATELY . . .
A client who assumed the contingency as dollars he could spend on extra project work was dismayed when the contingency funds were exceeded by the end of the project for the unknowns encountered as well.
Our counsel: Relegate the contingency to its intended purpose -- as funds that are part of your budget for the expressed purpose of absorbing unforeseen costs. If managed well and few issues arise, your project should come in at or under budget.
3. Construction is not a "design phase" of work. A substantial set of drawings will elicit project costs based on the design delineated therein. However, drawings that are not fully developed are subject to "allowance" pricing by a GC, which is a major component of project cost overruns. Investing time in design decisions and drawings will save dollars that are spent when dentists design during construction.
UNFORTUNATELY . . .
A client who used the construction phase as a chance to fine-tune the project's design did so at the risk of cost overruns.
Our counsel: Think in terms of the design phase as constructing your office on paper. Participate and approve design concepts that will be incorporated into your drawings. Your lack of involvement or focus during design and subsequent expectation that you can make design changes during construction will definitely add time and cost to your project.
As the project owner, you have every right to be involved in the design and construction of your new office. We encourage you to do so without dismantling the very design and cost objectives you wish delivered by your project's completion.
Jeff Carter, DDS, and Pat Carter, IIDA, are owners of PDG - Practice Design Group. Located in Buda, Texas, PDG offers a full range of design and consulting services to dentists nationwide. For information, call (800) 511-7110 or visit www.practicedesigngroup.com.
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