Construction Scheduling Budgeting for a Positive Impact on Building ROI

Best Practices for Construction Schedule Service Estimation

CPM construction scheduling requirements are standard issue for any complex construction project over $5M. Many project owners who build below that threshold are beginning to demand more rigorous requirements from their builders, based on past negative experiences working with loose requirements: they want better controls over their investments. Yet builders who should, do not (seriously) invest in a CPM schedule for their projects because

  1. They have never seen a positive return of their investment
  2. They simply don’t understand the value of a bona-fide schedule
  3. Their clients seldom hold them fully accountable for meeting scheduling requirements
  4. A sophisticated schedule requires outsourcing to a consultant, something they are extremely loath to do.

Of the four, #1 strikes me as the most cynical. I say it is cynical because CPM methodology can be an abstraction that even the most seasoned builders may not grasp. If they did, they might be able to appreciate more the value of a valid schedule. For more on the topic of the value of CPM schedules to general contractors and construction managers read this post.

Scheduling, like most other general conditions, is an abstract concept to most owners. They often don’t understand what they are buying, except in the most general sense. For that reason, general conditions are the most difficult to sell, and even more difficult to quantify in a delay claim. Ironically, a delay claim for general conditions can only be accurately represented with a CPM schedule.

#3 enjoins a vicious circle that I consider a bane of the industry: specifiers indicate project scheduling requirements that are routinely not met by the contractor. Misunderstanding and complacency from the owner allows the practice to persist. This is bad for business all-around.

It is the general contractor and construction manager who must calculate the cost for CPM services, and pass that on to their clients in their general conditions budget. There are a myriad of ways in which they might do this – the accuracy of most of which does not instill great confidence. Even for successful schedulers, estimating the cost of scheduling services can be a less than exacting science. Unlike, say – an estimator figuring the cost of laying masonry units; an activity easily measured in material, equipment and labor. General contractors and construction managers are even more hard-put to determine the cost and sell-price for CPM. As a result, they bundle the service into their general conditions, which are typically factored as a percentage of the base price.

Thus, bundling CPM services into general conditions – without – for the most part, having to specify the sum, is a widely accepted practice for general contractors. My experience is that most general contractors will use only a percentage to calculate the total general conditions, and show no break-outs. I.e., they would be hard-put to issue a breakout for scheduling services, if they were asked. A construction manager is much more likely to issue general condition breakouts – including scheduling, in his estimates, as well as billing statements to the owner.

The only way a scheduler can estimate the cost of his services with any degree of accuracy is for him to have access to proper project documentation: drawings, and specifications indicating scheduling requirements. He must also know what degree of participation he can expect from the project team: will the project team be responsive in communicating how they envision the timeline, or will it be generated solely from the scheduler’s perspective only? If the contractor’s participation rate is low, or sub-par, the scheduler will have to pick up the slack.

This latter circumstance – the unilateral scheduling effort, is the most difficult to quantify, due to the level of guesswork that must take place: guessing at how much input to expect from the builder (and his sub’s), and guessing at a fair rate of compensation. Certain developmental schedules – such as those in the D&D phase, must be billed hourly, as there is not a quantifiable scope of work to inspect (construction drawings, specifications, etc). This is perfectly understandable, but is the last choice for owners, as they perceive risk. Accordingly, owners and contractors may ask for a not-to-exceed (NTX) price, which an experienced scheduler can – in most cases provide.

The least level of guess work takes place with repeat clients, because the scheduling team is on familiar ground. Thus, great care must be taken with contractors you have never worked with, or who do not understand scheduling. It is incumbent on better estimators to educate the contractors they work with, and owners they work for, as to the best way to facilitate the generation of, and maintain a schedule; in my mind, a win/win proposition.

 

Written by

Derek Graham is a Primavera 6 scheduler and schedule oversight consultant for public and private sector projects with four decades of construction industry experience. He has been an active construction expert witness in over 30 cases - both nationwide, and Federally, since 2006, when his book Managing Residential Construction Projects, was published by McGraw Hill