Facility Owners Bear the Costs of Inefficient Construction Management

Facility Owners Bear the Costs of Inefficient Construction Management

A couple weeks ago I was talking with one of our construction management clients about the cost savings and benefits of using EADOC’s web based construction management application. The CM asked if we had any advice on how they could present the cost savings of using an electronic construction project management application to their client. I suggested the CM explain to the client how all the cost of inefficient processes like paper submittals are coming from the client’s pocket with the following explanation.

  • Contractor prepares a bid price based on labor, materials, sub costs and overhead for a project. Typically the overhead rate includes office admin staff, printing, filing, and other costs associated with meeting the clients requirements. Contractors adjust this rate depending on the client and their requirements. Therefore clients requiring contractors submit paper documentation will see higher bids then clients allowing for electronic submission.
  • Construction Manager calculates costs of work, adds markup and submits as fees to the client. Every CM contract we have seen has an overhead rate or line item for office costs. This cost is based on the amount of administrative work that has to be done for the client. The more paper the client requires the higher the cost to the client.
  • Designer estimates cost of construction services, typically as number of hours per submittal review. If the designer has to spend one hour just logging, copying and shipping the submittals this cost is included in their price to the client.
  • This process is also conducted by sub contractors and sub consultants. All the costs of meeting the owners requirements are calculated and passed back to the owner in the form of bids and fees. The owner is not only paying the actual costs but also the profits that are typically added to these fees. As an owner you should really review your specs to see if the 6-10 copies of paper documents you require is really worth the impact this will have on your budget.