Construction is a critical process, and it is essential for clients to have a design in place before selecting a contractor. Issues and problems often arise once construction begins, leading to project delays, cost overruns, and low-quality work.
To address these challenges, external consultants providing construction management services or project management are highly recommended. The primary goal of CMS is to prevent low quality work, cost overruns, and project delays.
It is crucial for CMS consultants to possess strong integrity values to avoid any potential political or corruption issues with contractors, especially considering corruption is a significant problem in the Philippines.
While some project owners may view consultant services as an additional cost, it provides assurance that unforeseen risks will be effectively mitigated.
Mostly for complex projects, the cost of Construction Management Services (CMS) amounts to approximately 10-15% of the total project cost. Consultants often recommend having an additional 15% contingency reserved for potential discoveries during critical phases such as Shop Drawings review, Material Approval, and Methodologies best practices. These pre-construction assessments may lead to disapproval or rejection of certain elements necessitating changes that could impact project costs. However, it’s important to note that such measures significantly enhance project quality and adherence to timelines.
Sample Project Computation with CMS:
- Supervision Cost: 15% of the total project cost.
- Supervision Cost = 15% of 500 million (Total Project Cost) = 75 million
- Contingency (15%): 15% of 500 million (Total Project Cost) = 75 million
- Total Project Cost with Supervision: 500 million (Original Estimated Project Cost) + supervision cost + contingency
- Total Project Cost = 500 million + 75 million + 75 million = 650 million
In this scenario, let’s consider a project proceeding without any construction supervision services. The risks are significantly heightened in this scenario, as there would be no checks and balances for ensuring quality work, monitoring schedules, and managing costs. Any work rejection or necessary rework would incur additional costs, typically resulting in overruns of up to 300% of the total project cost. This would not only delay the project timeline but also impact the project investors by delaying their return on investment.
Without Construction Management Services (CMS):
Original Project Cost: 500 million (Sample Project Cost)
Potential Overrun: Let’s consider a range of potential overruns due to rework, rejection of work, and project delays, ranging from 100% to 300%.
- 100% Overrun: 500 million (Original Project Cost) * 100% = 500 million additional cost
- 200% Overrun: 500 million (Original Project Cost) * 200% = 1 billion additional cost
- 300% Overrun: 500 million (Original Project Cost) * 300% = 1.5 billion additional cost
Total Project Cost without CMS:
- For 100% overrun: 500 million (Original Project Cost) + 500 million (Additional Cost) = 1 billion
- For 200% overrun: 500 million (Original Project Cost) + 1 billion (Additional Cost) = 1.5 billion
- For 300% overrun: 500 million (Original Project Cost) + 1.5 billion (Additional Cost) = 2 billion
So, without CMS, the total project cost could range from 1 billion to 2 billion, depending on the extent of rework, rejection of work, and project delays.
Furthermore, having a consultant who collaborates with the client in decision-making proves to be invaluable. This approach enhances effective decision-making for project owners. We emphasize that construction management and project management are indispensable, ensuring the fulfillment of all project owner expectations, fostering trust with stakeholders, and building a strong reputation in the industry.
Author
Engr. Florel Cruz
Vice President in Construction Management and Supervision
