Building and operational costs curbed

Building costs in residential development increased over the past five years by about 50% with other segments doing a little better.

The way to cost reduction goes through quality initial concept, suitable selection of technical security of buildings and reliable construction management. Investor can save up to dozens of percent of the estimated project price in the planning phase and further savings can be gained if the development proceeds without appointing a general contractor. Construction management is frequently used abroad and is only in its infancy here in Czech. Nevertheless, the potential is enormous. Everything starts with a well thought-through concept, which leaves out unnecessary expensive solutions and detects possible negatives of the project and location at the same time. “And it is the beginning whereby one needs to consider a number of details and connections with the building phase as well as the subsequent operation of the building. Building costs, including the purchase price for the plot, makes up approximately one quarter of costs within the building’s lifecycle and the operation, maintenance and consequent reconstructions represent the remaining three quarters,” says Ing. arch. Karol Lakatoš, who leads the Design & Architectural team in the building and consultancy company OM Consulting, and continues: “It is necessary to choose the right construction system from the point of view of materials and processes. What is also important is co-operation between the architect and cost manager, a specialist for mechanical, electrical and plumbing (MEP) and a project manager. Within the framework of our company, we consult daily with colleagues from different fields, attempting to find the best functional and economic solution for the investor.”

MEP puts soul into the building

The role of the technical equipment of buildings (mechanical, electrical and plumbing – MEP)) is crucial in the concept phase. It decides on the quality of one’s stay inside the building and it also has a significant influence on the price of future operation. They say that a building’s nature lies in whatever comfort it can provide the user with. At the same time, comparable buildings (with regards to size, age and function) can have a million differences in operational costs per calendar year. The smart MEP can create high user standard at reasonable operational costs.

“We consider services in the area of MEP that fundamental that we earmarked an individual centre from our project management department. The centre comprises nine specialists who attend to MEP on a daily basis and gained their experience at many varied constructions,” says Ing. Karel Rod from OM Consulting, who leads this team. He himself has been through 30 years in the MEP field and participated, for instance, in the construction of the Nuclear Power Station Dukovany, a number of well-known shopping centres, administrative buildings and production halls throughout the Czech Republic.

Preventing unpleasant surprises

“If the MEP specialist is invited in time, he can find out in an early part of the project that the project is, for instance, planned in a particular dimension and cannot be connected due to an insufficient network of utility services to the particular plot. It is then up to the investor to decide as to whether to modify the project or invest in additional infrastructure. This prevents negative surprises in the phase that would already bring in extra costs,” explains Karel Rod.

What is characteristic for MEP, is a considerable number of various measurements that are carried out in individual phases of the construction. Operational costs then stem from the particular equipment of the building and the technics ability to assess the measurements and take subsequent measures.

Without a general contractor

Another way to reduce building costs is to replace the general contractor with an independent consultancy company – a construction manager, who takes on the management of the whole construction, tenders out to individual contractors, negotiates contracts and purchases the individual components and parts when necessary directly at the investor’s expense. The project abides by an agreed schedule and budget and regular assessment allows one to respond.

Savings for the investor

“Savings for the investor comes from unused co-ordination, risk and overhead surcharges and the general contractor’s profits. This tends to run between five to ten percent,” says Ing. Martin Hubač, Head of the Construction Management department at OM Consulting, and adds: “Construction management is also much more flexible when it comes to project modifications. Whether it applies to a change of material or a response to a future tenant’s requirements.”

If the construction manager discovers during the construction that some of the phases can be realized at more advantageous conditions, the saved resources remain in the investor’s cash box. If the construction proceeds with a general contractor, the building price is set by contract and is fixed. Each negotiation about change that is held once this contract is concluded is difficult and often leads to either increased price or a delayed deadline.

Construction management in Czech

“Construction management is a commonly used way of construction abroad. In Czech, developers are only just getting used to it. It is, for instance, used by Penta Real Estate, for whom we managed, as construction manager, the construction of the luxurious apartments Maison Ořechovka in Prague,” says M. Hubač.

“The work included the demolishing of a five-storey building and extracting a foundation pit. Since the foundation slab was laid and the rough structure was put up, we gradually arrived at client changes for individual apartments. The consultation of project documentation, the tendering of all contractors and management for the whole construction come as a matter of course,” states Martin Hubač.

Management demands

What the investor must count on during this way of construction is higher administration demand as it is associated with a greater number of contracts with contractors. This is further associated with the issue of guarantees and possible warranty claims. Negotiations with financing institutions is also more demanding as the final construction costs cannot be fixed in advance when utilizing a construction manager.

Ways on keeping costs curbed are clear. What is fundamental is to include a whole team of specialists from the beginning so that the preparation work proceeds in coherence. “Thanks to the size of the company and strong background from the specialists from other building segments, we can provide the client with a compact view and perspective. The possibility for immediate consultation and permeation of one’s knowledge represents a significant advantage towards our competition,” concludes Karel Rod.

JK / Photo: Penta Real Estate