Sharing Our Insights

The process of developing or renovating a space can be very complex. If you’re new to the process, it’s natural to have questions. If you’ve done it before, you know that you need to be organized, vigilant and knowledgeable, or you need someone who is to assist you. As real estate project management consultants since 1992, David J. Spector & Associates has many of the answers you’re seeking. We’d like to share some of our insights here.

Understanding Project Management

1. What’s the difference between construction management and project management?
2. Why do I need a project manager?
3. Is my project the right size for a project management consulting company?

Industry terms

1. What is value engineering?
2. What is retention?

Navigating the process

1. How do I hire an architect?
2. Do I need a building department expediter?
3. What sort of insurance policies should I carry during a project?
4. What are the advantages/disadvantages to using union labor vs. non-union?
5. Do I need to get a bid or performance bond from the contractors?

Energy efficiency

1. Who do you consult with about energy efficiency?
2. Are there programs available to help mitigate the costs associated with building energy efficiency?

Understanding project management

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   What’s the difference between construction management and project management?

   As the primary contractor of a construction project, construction managers hire and supervise all subcontractors, vendors and material suppliers. They manage and coordinate all activities on the construction site. In addition they often provide preconstruction services including estimating and construction scheduling. Project managers represent the owner’s interest beginning with selection of and negotiating the contracts with the construction manager and other contractors and all the consultants to supervising all construction and design personnel to ensure that the schedule, budget, and design intent are fulfilled. At DJS&A we take a leadership role in administering all construction contracts, enforcing schedule adherence, change order negotiation, and dispute resolution.

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   Why do I need a project manager?

   Our project management professionals lead and coordinate the activities of the architect, engineer, contractor and all other consultants from a top-down perspective. These parties are often considered natural adversaries that require a knowledgeable leader to officiate and ensure that the owner’s project goals are met. At DJS&A we also take the lead on interfacing with outside parties (landlords, municipalities, adjacent property owners, etc.) whose relationships are important for project success.

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   Is my project the right size for a project management consulting company?

   Most projects with a value of $1 million and up will benefit from a project manager’s involvement. The team at DJS&A has the capability to negotiate contracts and favorable pricing, and the management skills to keep the design and construction teams focused and moving forward.—Our participation will result in substantial cost savings and on time project delivery.

Industry terms

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   What is value engineering?

   Value engineering is the search for cost-saving alternatives for materials, equipment, installation techniques, or logistics. These alternatives can, if selected, save the owner money both in initial construction costs and long-term operating and maintenance expenses.

   Value engineering has become a cliché in the building industry and is rarely exercised properly. For it to be effective, adequate time must be provided in the schedule and the appropriate expertise must be assembled.

   Value engineering should not be a separate exercise. Rather it should be a continuous and inherent component of the design process, rather than an isolated exercise. This requires continuous and clear communication between designers of all disciplines and their construction counterparts. Project managers should facilitate this process, enabling continuous feedback on costs, constructability and logistics, so that the design comes in on budget and can be built on schedule.

   David J. Spector & Associates conducts cost benefit analysis that provides clients the detailed information required to evaluate design alternative for cost savings.

   Often at DJS&A, we suggest including value engineering options as alternates in contractor bid packages so that the “real” savings is qualified and available if budget pressures warrant a reduction in the construction cost.

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   What is retention?

   The retention concept in a construction contract provides protection for the client by withholding a portion (usually 10%) of the payment due to a contractor for work completed. The retention is often reduced over the course of the build-out and the final payment held until the punch list is completed, and the completed work is accepted by the architect and/or client. We incorporate clear and concise retention clauses in all of our construction contracts. Our project managers are experienced in leveraging the retention to ensure project completion to the owner’s complete satisfaction.

Navigating the process

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   How do I hire an architect?

   At DJS&A we help our clients locate the right architect for their project by carefully matching their design needs with the capabilities of the many firms that we work with. It is important that the architect has a full understanding of the client’s design goals and desired level of involvement, and that the client understand the design process from conception to completion. We will tailor the architect/owner contract to cover the full scope of the project and ensure that all schedule and budget restrictions are met.

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   Do I need a building department expediter?

   At DJS&A, our project managers recommend hiring an expediter for clients planning a renovation or new building project in New York City. These professionals are instrumental in helping architects, engineers, and contractors navigate the bureaucracy of the Department of Buildings for permits, sign-offs, inspections and Certificates-of-Occupancy. Our project managers are experienced in the intricacies of the Department of Buildings and the building code and can effectively guide the expediter and design team towards timely approvals and completion.

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   What sort of insurance policies should I carry during a project?

   Your standard liability insurance policies, whether commercial general liability or homeowners protection, may not cover all the risk involved in a renovation project and certainly would not be adequate for any new construction. Property insurance does not always cover losses related to renovation projects. There are a number of specialized insurance vehicles currently available to cover all aspects of a construction project, which sometimes offer better project coverage than simply raising liability limits on your existing policy. Subguard policies protect against contractor defaults. Owners’ or Contractors’ Protective Liability (OCP) policies protect owners and contractors from any damages they become legally obligated to pay. A Builders Risk policy protects the materials, fixtures and structures during the course of construction. DJS&A will work with you and your asset manager and/or insurance broker to evaluate your current coverage in light of the proposed project, identify any uncovered risks, and put together the most cost-effective package to meet your project’s needs.

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   What are the advantages/disadvantages to using union labor vs. non-union?

   Non-union labor can usually save about 20% on your project costs, though the gap between union and non-union has been shrinking during the economic downturn. However union labor is generally thought to be more experienced and to work within stricter safety standards, and using non-union labor on larger projects can lead to project disruptions and additional time and expense. The construction professionals at DJS&A are well versed in the pros and cons of each labor type and can assist you in making the right selection for your project.

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   Do I need to get a bid or performance bond from the contractors?

   A Bid Bond provides an owner protection from a change in the value of a contractor’s bid from the time it is received to the time a contract is awarded and signed. The Bid Bond ensures that upon acceptance of the bid by the customer, the contractor will proceed with the contract at the bid amount. This guarantee is made by a third party guarantor after confirming that the contractor is fiscally sound.
   Performance Bonds protect the owner in the event a contractor defaults and fails to perform their contracted obligations. These bonds can be written in a number of ways, but generally the guarantor provides payment for the premium to replace the defaulting contractor. Thus, the owner is protected from the added costs, which would be incurred to bring in a new contractor in the middle of a project.

   Bid bonds are often mandated for large developments and public works projects. They are not generally required when bidding smaller private contracts.

Energy efficiency

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   Who do you consult with about energy efficiency?

   At DJS&A, we utilize the expertise of several knowledgeable consultants on the subject of energy efficiencies in construction projects. MEP (mechanical, electrical, plumbing) engineers advise our clients on issues related to the electrical and fuel usage of their air conditioning and heating equipment. Architects and lighting designers influence energy use in their specifications for appliances, light fixtures, and building envelope systems. And LEED (Leadership in Energy & Environmental Design) consultants coordinate the design team on all energy and environmental issues for projects seeking LEED certification. Our project managers are well versed in the complexities of designing and building your project to be environmentally sustainable and energy efficient.

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   Are there programs available to help mitigate the costs associated with building energy efficiency?

   DJS&A can assist you in your participation in several cost-saving programs relating to energy efficiency. For example, Con Edison and LIPA offer incentive programs for using certain types of energy efficient equipment. New York City offers tax credits for installing green roofs on buildings. And NYSERDA offers incentives for incorporating environmentally sustainable features in your building that comply with LEED and Energy Star standards such as photovoltaic panels and using renewable energy sources. Several of NYSERDA’s programs will even fund the cost of using a specialized consultant to help achieve a LEED rating or to meet Energy Star guidelines.