Office relocation projects provide exciting possibilities... it's an opportunity to provide the optimum business environment to achieve peak performance and improve profitability.
Moving your office is one of the largest investments your business will make. Few of today's organisations have the experience, time or resources on hand to manage this task effectively. There is no doubt that embarking on such a project is a serious business, which could have significant financial and non financial consequences to your business if not managed effectively.
A recent independent survey showed that 90% of companies overspent on their office relocation and fit out project. Many of these overspent by more than 20%.
The main reasons for this were lack of clarity in the original project brief.
Design detail incomplete when appointing a design and fit out contractor under contract.
Unable to retain control over the project costs through lack of experience and in house resource.
At the start of any project a client will be concerned about budget. Whether you are spending 50,000 or 500,000 you want the same things - good design, quality build, delivered on time and most importantly you want the project within the budget you set.
Will investing in independent project management and therefore having to pay management fees be a good use of your money?
Or should you hand the project over to a design and fit out contractor who will provide you a single point of contact throughout the project?
Design & Fit Out Contractor:It should be recognised that the design and fit out team will be employed by the same company who understandably are looking to maximise their profit on your project. Designs will influence project costs and the design resource will be based on a percentage of overall contract costs as will the project management costs. These companies are slick in their approach and extremely clever with smoke and mirrors.
Percentage mark up between 30% and 45% on contract fit out costs. Variation costs under the build contract can be higher.
Unless you have in house experience to manage this type of contractor how will you know if you are getting value for money throughout the project programme and costs are controlled to avoid surprises at final account?
Changes to any project are inevitable - some will be your choice and some unavoidable changes. Any variation works identified during the contract build period will incur costs difficult to quantify against the original scope of works produced by the fit out contractor - unit costs, profits and overheads are combined within the schedule of costs.
This approach to managing a project has its place clearly, in particular when short project timeframes restrict the opportunity to define the design detail and go to the market for tender. If this is the case consider appointing on a fixed fee contract a professional QS / Project Manager to monitor cost for you. You will more than recover the fees against the cost savings.
Project Management Consultant: An alternative approach if you start to plan your project early enough is to appoint your own professional management team under a fixed fee basis to oversee and value engineer the design process and manage your relocation project.
Once appointed the first thing your project manager will do is work with the selected designer and your internal managers to obtain a detailed brief and understanding of your organisation, how you work now and the opportunities for changing or improving working practices within the new office environment.
A realistic budget at the beginning of the project is critical. An accurate budget will develop as the space plans and designs are detailed and your project manager will also build in the correct amount of contingency funding, the "what if...." part of your budget. Remember 'change happens in projects' it's how you manage changes that will be critical.
All fit out projects have risks - before the project starts some risks will be known, some unknown. Part of what you're paying project management fees for is risk management - your project manager will know how much of a percentage to build into your budget (5% is general).
Designs will be agreed in detail and signed of by you the client prior to a final schedule of costs being prepared for tender packages.
A tender package of documents will be prepared by your project manager. A tender package based on detail designs and schedule of works means that each contractor will have the same information to price. Contractors will be required to break down each element of their price - this means that you will get like for like pricing and will iron out any potential financial surprises sooner rather than later.
An agreed overhead and profit (OHP) between 5 and 15% dependent on the project size and scope will be declared.
Price variations between contractors can run into thousands. If you are confident that everything that needs to be priced has been and contractors have been reference checked for financial stability and quality of work, the cost of your project management fees will be more than covered by the savings that can be made at this tender stage.
Once a main contractor has been selected a suitable professional JCT contract will be prepared by your project manager that ensures you and your contractor is fully protected.
You project manager will take responsibility for managing any changes within the construction programme. Changes within specifications will be managed against the agreed unit costs and original declared profit and overheads. It's not an opportunity for the contractor to overcharge or maximise profits.
Final accounting at the end of the project will identify all agreed variations and any savings made through the contract period. This is the opportunity for your project manager to demonstrate the value of his fee, the cost savings made through the programme and ensuring that you retain a sensible percentage of the total bill within the agreed contract defect period.