The Pitfalls of Construction

By Mike Hayes, National Sales Manager Tech-Fast Self Storage Buildings

All developers whether new to construction or experienced in many projects have the need to do their due diligence, establish a plan, assemble a team and create a communication system that will allow for the best possible project to be built.

These fundamentals are crucial to the successful construction of a self-storage project. As we listen to our clients talk to us about their business plan and expectations from their supplier/erector we are continually reminded by them how important the schedule and budget are to their financial success. After all, isn’t it every developer’s desire to bring their project in on budget and on time? I haven’t met a developer/owner yet who wouldn’t answer this question with a resounding YES! And then throw in another qualifier by saying, “and don’t forget to meet my high quality standards too”

These are the challenges we are all faced with to do it right for our clients. Notice that I said “we.” Even though I represent a substantial portion of the critical path element of every project it takes a team to accomplish these goals. Each player on the team participates, the owners, designers, contractors and suppliers; remember no one on the team gets to sit in the bleachers and watch.    

Let’s talk about the due diligence aspect of construction and development. Before construction can begin there are a host of items to be considered. Is this the right location? Is it affordable? Does my feasibility study support the need for storage at this location? Can I build on this site? These are some macro questions that must be answered before you go forward with your project. There are many other questions that need to be asked and answered but I will focus on the construction related part of the due diligence.

Your contractor cannot provide you with an accurate proposal for costs if it isn’t known what soil conditions exist (especially multi-story), is there fire flow, what are the conditions for drainage, is there an architectural review board requiring certain exterior materials or landscaping, is there a specific code for self storage by the permit issuing jurisdiction and will they accept variances? These are some of the issues you will be faced with in your construction process. Your budget cannot be established let alone met if this leg work isn’t done accurately and completely. As a general statement, the surprises and cost impacts come from the site development portion of the project. Most suppliers will be able to give you accurate costs for both materials and labor on the building, doors, security systems, concrete, paving, landscaping, fencing, signage and finishing costs of your office. How you handle water retention-detention, wetlands, poor soil conditions, environmental impact issues, bringing in water/utilities and site preparation are all variable costs that can have significant impacts to the budget and financial success of your project.  

So, knowing all of this, how do you get this done? That’s where the team comes in. You will need a civil engineer to help with the site design and to explore the above mentioned site issues. If you are using a general contractor he/she may provide you with a full service design package to include civil design as well as architectural services to meet life safety issues and overall design acceptance. Most building suppliers will provide the structural design package needed for permitting. If you are an owner acting as your own general, these issues must still be handled. Remember, one of the most important goals here is to get a building permit. Get the right players on your team to make that happen.

Now that you’ve assembled your team, how do I contract to get this work done and at what price? There are a number of scenarios that may develop. Self storage projects get built by many different methods. Owners may choose to go it alone, owners hire a design team directly and then contract with a general contractor for the construction, owners hire a construction manager to handle the complete process or they may break out other components of the process and combine them with other professionals. Our opinion is it really doesn’t matter. What matters is that the complete scope of work gets covered and that the responsible parties carry out that scope of work.

 There are three typical types of construction contracts: 

1. Hard bid with a defined scope of work for a price.
2. Guaranteed maximum price contract (GMP), to complete the project for a determined sum based on a defined scope of work. This contract type usually has a cost savings provision where both parties share in the cost saving.
3. Time and materials, where the contractor agrees to complete the scope of work with a percentage mark-up on materials and labor.  

All three types have pros and cons. It has been our experience that the contract type is not as important as a clear understanding in each contract of the desired scope of work. It is very important that every owner/developer understands not only what he/she is getting in each contract but as importantly, what is not included. I can tell you that contracts are signed everyday without being read and understood. If I communicate anything to you via this article please remember to read and understand your contracts. Most contractors are trying to communicate to you via their contract what they are going to provide you and for what price. We have a long list of exclusions in all of our proposals for the express purpose of defining our scope of work. We do not want to see a “hole” left in the scope of work for our clients that creates a contentious situation and additional costs outside of the owner’s budget.

A critical part of every project is the schedule. More pressure, stress and emotion are applied to this part of the construction process than almost any other. It is important that a schedule is developed by the contractors and owner. Our opinion is that this is a mutually agreed upon schedule. Committing to a schedule “handed” to a contractor is the beginning of a rocky and tumultuous road. Having your design and construction team members contribute to the establishment of the schedule is not only good planning but makes the completion date realistic. There are multiple trades on every project that need to coordinate their manpower and materials. If they are not given the opportunity to sequence their work with the other trades, milestones and completion dates won’t be reached. Remember, contractors make money by completing projects. It is in their best interests to complete your project as quickly as possible. This is a win-win situation; make the best of it by including them in the establishment of the schedule.

I will share with you a comment made by the general contractor of our own self storage facility. He explained that the single biggest cause for schedules not being met “is not getting started.” We see this as well with our clients. They have an anticipated opening date but have not coordinated that date with their team. When you’ve made your decision to build your facility, work out the contract, let your teams get started and turn them loose. This will have nothing but a positive effect on your schedule! 

 We believe another critical part of successful contracting is communication. As mentioned earlier we believe this process is participatory. We have seen clients who believe that once they have signed a contract they become spectators. It is important for owners/developers to understand that their participation is crucial to the effective execution of a contract. To that end we have developed what we call our “Client Success Plan.” The best written and completely understood contract will not withstand every circumstance that develops during the construction process. In this plan we outline the flow of the project from contract signing to opening day. We have done this to let the owner/contractor know what their responsibilities are along with ours to work as a team and complete their project on time.  In-fact part of a contract will include provisions for changes and this is typically handled through change orders. Change orders should not be a point of contention if the contract scope of work is outlined clearly and understood by both parties. Change orders go both ways. They can add to the value of the contract as well as deduct from the value depending on the change. Creating an expectation that is real, for us as a supplier and contractor, is critical for our continued success. It’s part of a successful planning and executing process.