ADMINISTRATIVE DUTIES OF A GOOD PROJECT MANAGER

In the last writing we focused on the on-site duties of a good construction project manager.  In this issue we will delve into the administrative duties that are also necessary.

Construction project managers have come from one or two basic paths:

  • Those that rose up doing physical work on site, typically carpentry.
  • Those that graduated from a college with a degree in construction project management.
Photo by cetteup on Unsplash

They both have advantages and disadvantages that are rather apparent:

  • Those that rose up doing the physical work how to put a building together but are naive about the systems required to properly manage the administrative duties such as budget accuracy.
  • Those that graduated with a degree in project management are knowledgeable about software and systems but lack the knowledge of how trades and materials interact in real life.  

Of course the best are those that have gained knowledge of both.

A good home construction project manager is competent at:

  1. Creating a realistic and complete budget.
    1. The best starting point for a project is a budget that a has included in it all the line items that will require funds in order to complete the project.  
      1. A one page outline is not enough, too many items can be missed.
      2. A laborious budget that is too specific can also be tedious to work with.
    2. The ideal is a budget that has enough line items that it forces the project manager to remember and deal with all the pertinent items that will need funding.
  2. Creating a schedule that is digitized and can be updated easily.  Typical schedules are called gant charts or bar charts.  
    1. Schedules should be digitized because it should have the following qualities:
      1. Dependencies:  That is where the start on a task is dependent on the completion of other prior tasks.  For example unless it a a project with many concurrent phases, foundations must be completed prior to framing.
      2. Have an identifiable critical path.  These items must be completed in the sequence shown for the project to be completed.
      3. Be easily updated.  A hand written schedule on notebook paper becomes misleading and good for the dust bin within one month of starting.
    2. A good construction project manager in the San Francisco Bay Area must be good at managing the schedule because there is so much demand for workers that they must be scheduled way in advance.
  3. Manage change orders.  Yes there will be change orders, no matter how good the plans and the builder are.  Custom home construction is unique and new issues become apparent during construction.
    1. A good project manager is knowledgeable about construction so can quickly discern if a cost requested  for a change is appropriate.
    2. It is the project manager’s job to know what line item in the budget spreadsheet to charge this to.
  4. Processing pay requests and logging them into the budget.  This is where a software system designed for the purpose of tracking pay requests is critical.  No, Quickbooks is not the answer.  Quickbooks does not have the capability to tell you how much has been paid, what is left to pay, and what percentage of the total line item budget is consumed.  This information is critical for a project manager of a construction project to keep on top of the budget as it is being spent.
  5. Collecting warranties and lien releases.  A good construction project manager will make sure these collected and collated before the end of the project.

For the administrative purposes alone an experienced construction project manager is crucial, especially when building a custom home, and especially when building a home in the condensed areas of Oakland, Berkeley, San Francisco and other parts of the Bay Area. Without someone with the knowhow and ability to stay on top of these tasks subcontractors, supplies and even simple things like permits can slip into the cracks or through your fingers. 

Read More

THE PERILS OF THE HOME MORTGAGE PROCESS

The following applies to mortgages called “jumbo” or over the standard Fannie Mae size that you hear adds for such as “rocket mortgages”.

If you are in a position of considering a refinance to help you purchase a home you most likely know someone who has gone through this process already. If you have then you probably know that refinancing (especially with a “jumbo” mortgage’) is going to be painful. In this blog I am going to give you some details that many don’t learn about until they are knee deep in the process.  I am hoping that I can pass on this information to forewarn you of the difficulties you may encounter so that you may be able to prevent them.

This process, unfortunately, can be costly and you may start to feel like you have no control.

Five realities that become apparent once you enter into the process:

  1. The system is structured to favor the wealthy.  The more money you have, the easier it will be to get a mortgage and the lower your interest rate will be.
  2. As with any commission based field, the lending agents will make big promises to entice you but may not be able to follow through on the offers they have made. Once you are embedded in the process the pitfalls that raise your costs will become apparent, but only one at a time.
  3. The process is somewhat unpredictable and there is no roadmap as to the next steps required.
  4. You will be paying for expenses along the way, such as appraisals.  So have some cash available.
  5. Most likely there will be a need to put in cash at closing.  You will not be able to anticipate how high these costs are so be prepared to pay more than what you were originally told.

This is an arduous and frustrating process thus it is important to know as much as you can so you will be prepared for a long process that can be quite difficult to navigate. There are a few things you will probably not have a lot of control over that will affect you directly. 

For example:

  • Your credit scores, (which determine the interest rate): Typically the fewer credit cards and loans you have the better your score will be. However, if you don’t have at least 3 credit lines, and you don’t use them, your score will be lower than if you actively use credit.
    • Be on guard that your loan sales agent or broker does not seek too many sources of funding which will individually run a credit check on you.  Apparently two or three close together is not too harmful, but beyond that any further checks will cause your credit score to  drop like the ball at Times Square at New Years.
  • Appraisals of your property: These can vary widely and rise and fall with the mood of the housing market.  In addition you will not be able to choose the appraiser, the loan officer will assign you one of their choice.  This could result in an appraiser from out of the region where you live which can result in them being significantly off in their perception of value.
  • Let’s say that you are assigned an appraiser that puts your house at “market Value” or gives an assessment that seems reasonable to you; unfortunately you are not out of the woods yet. There will be a second appraisal done called a “desk appraisal”. This in an appraisal done by someone who has not seen your home but they set guidelines for the secondary market. The lenders do this because they intend on selling your loan about twice down the line and they are the ones that give a value of your property.
  • Cash needed at closing:  Not all expenses may fit into the loan, so you will have to come up with cash for taxes and a long list of costs at closing.  You will not know this amount until a few days prior to needing it.

Percentage rate for interest on your loan directly affects your monthly payment amount.  Every strike against you such as your credit score, or the amount of reserves you have affect this rate.

What I found disturbing is that I could not get a roadmap as to the steps involved in this process, and the amount of time each will take.  It seems there is always a rush because there is a constant set of surprising discoveries along the way.

It is important to remember (albeit frustrating) that when you are applying for these loans you are at the mercy of the lender. They are able to handle these loans however they like. The housing crash in 2007 made banks rethink how they give home loans. The end result was creating this process that leaves the lender in power and the lendee in a position where they have no control. 

It is my hope that you will not experience all of these roadblocks during your mortgage process and that you use a broker that will make you feel like they are invested in you. Hopefully some of these thoughts above result in an outcome where you end up with a decent mortgage on your great property. 

Once you have completed the mortgage loan process and have the amount of money you need to make improvements on your home you will have the power back in your hands and can start the process of hiring a team to help you with renovations. Please refer to my older blogs for tips and advice on how to make the rest of your renovation or home improvement process organized, easy and puts you in charge. 

Read More

INTRODUCTION TO SERIES ON BUILDING SCIENCE

Over the next few weeks I will be publishing a series of articles on practical applications of what has come to be known as “Building Science”.  Yes, there is such a term.  “They don’t build them like they used to” is quite true, but in a good way, we build much better now.

We have learned so much since the days of the log cabin in the real old days, and Sears kit houses which symbolized the emergence of fast and efficient building techniques after WW2.  Every year there are new products offered by an industry that has a world wide market.

In North America we build primarily with wood because that is a resource we have available.  In more Southern countries cement and masonry are the  dominant building materials.  High-rise buildings are made primarily of steel.

The concepts of preventing moisture infiltration, of creating healthy and comfortable buildings is similar in all.  What is important is a thorough understanding of how to combine materials so as to prevent holes.  Holes that allow water to enter or air to both enter or exit uncontrolled.

In the evolution of building techniques we have both improved our buildings in terms of energy efficiency, and at the same time created some flaws such as trapping moisture.  We have made our buildings more comfortable but at the same time sealed in some very harmful chemicals.

That is where building science comes in, it is the well studied concept of best practices.  It is how to have an energy efficient comfortable and healthy building. Topics this series will cover:

  • We will address what constitutes a high performance building or home.  
  • We will learn how to avoid the pitfalls of moisture build-up and mold creation.
  • We will learn why we now split insulation into both inside and outside the wall to create what is called CI or Continuous Insulation. 
  • We will learn why we want to think of a building enclosure, and not building envelope.

Due to the horrific fires suffered by so many residents of California in the last year, we will also cover ways of lessening vulnerability to fire. For example, we are finding fire often entered attics through vents and started burning the roof structure from the inside.

In the next issues you will find information on:

  • Thermal movement control in homes (heat and cold)
  • Water barriers and rain screens that allow the building’s skin to breathe but repel water
  • Various new products that are worth considering in new construction
  • Fire prevention measures
Read More

HOW TO CREATE A SMOOTH, PREDICTABLE AND ENJOYABLE CONSTRUCTION PROJECT

I am listing below tasks that I have found are critical for creating a smooth running home construction project.  These are all tasks that an experienced Owner’s Representative, (a.k.a., Project Manager) should either initiate or ensure are accomplished during the design and building process. Ideally the Owner’s Representative/Project manager is to be the person in charge of managing these tasks listed below.

  1. Budgets:  Create budgets that are realistic at various times during the process in order for the owner to be confident that the project is proceeding within the financial comfort zone.  This budget should be comprehensive including all associated costs and wish list.  
  2. Budgets ideally are created:
    1. Early in the conceptual design phase and verifying as the design progresses that the original budget is still realistic.
    2. Prior to the construction drawings being drawn.
    3. Prior to construction starting
    4. Once a month during the construction. Keep owner apprised of Predicted Final Cost.
  3. The design team is the clearing house for all design related communication, unless otherwise requested.  We don’t want random people making design decisions that may not have the overall design direction in mind.
  4. Offer possible solutions to problems prior to announcing the problem.  Always consult with Design team first, then after agreement, notify owner of the problem with options for solution.
  5. Consolidate questions (RFI’s) into a list and then communicate these to the appropriate entities with as much lead time as possible. Avoid panic phone calls. Identify which party is responsible for answering each item: Architect, interior designer, owner, contractor.
  6. Arrange questions to be answered into groups by date needed in order to continue an orderly pricing/ordering/construction process.  
  7. Expect that some answers will come as building takes shape. In a true custom home some selections are best made when the building is taking on character.
  8. Send weekly updates to design team and owner apprising them of tasks being worked on each current week as well as planned for the following week.
  9. Plan ahead on critical times for owner and design team to visit the site; such as electrical wiring time, to avoid future surprises and changes.
  10. Make client feel as much an informed participant in the process as they wish to be.
  11. Schedule site meetings with all key subs, and if needed designers, during various stages of the job to coordinate their needs and timing.
  12. Update budget and schedule on a monthly basis and share with owners, and if desired, the design team.
Read More

Our Contractor Has Spent All the Money and We’re Only 65% Done, What do we do Now?

This is a phone call I get often in my work as an owner’s representative. While it seems like a very dire situation it actually is solvable, and it is possible to reach a positive end result.

The initial fear for most owners is that they have been ripped off by either an unscrupulous or unqualified contractor. But the reasons for this situation are actually more varied. Here are some of the common issues I encounter when I am called in to projects that are well underway but in trouble such as this.

  1. The cost of the work was underbudgeted by the contractor.
  2. The contractor let the scope of the work creep to include higher costs but did not properly document change orders or alert the owner.
  3. The owner had an unrealistically low budget in mind and convinced the contractor to attempt to do all this work for the low budget.
  4. And then of course there are times when there is the unscrupulous contractor who has sought to deceive the owner by entering into the work with a low initial budget while expecting to make it up on change orders.
  5. Finally there is the unqualified contractor who took on a project that he could not manage properly. Often this type of contractor has demanded deposits or payments higher than the work done to date.
  6. So what do we do in these situations?

Cost of work underbudgeted

For those projects that were under budgeted to begin with, a knowledgeable owner’s representative will be able to ascertain what a realistic budget should have been at the beginning. As the Owner’s Representative, I work backwards, and then advise the owner that this is the case and mediate a solution where the contractor can finish up the job at a discounted fee while the owner pays a fair cost to get the work done.

Scope creep and change order misunderstandings

This situation is especially difficult to solve, when the scope of work increased without acknowledgement from the owner. Retroactive charges for change orders are difficult to add to the budget for fair payments. Emotions are high, and blaming seems to be the answer. When there is tension between the owner and contractor, and a mediator is important to keep things clear.
It is typical (and understandable) for owners to only remember a small portion of additions to the scope of work. Of these the owner may remember only the core item but not all the ramifications of that change. Clearly communicating changes and their financial ramifications is one of the key ways an owner’s representative works to bring success to both the owner and contractor.

For example: “We just added air conditioning”
What was not documented was this also meant upgrading the following:
Electrical to supply enough power to the furnace coil and the condenser.
Walls had to be opened to run the copper fluid lines and wires from the fan coil to the condenser.
Walls had to be opened to enlarge the ductwork and move it up high on the walls.Construction project manager owners representative marin - 36

Unrealistically low budget

If the project got started with the owner pressuring the builder to accept a low budget, then we have to start questioning the intentions of the owner. Since the owners can typically control the flow payments to the contractor, the owner really has the upper hand. But forcing a low budget sets unfair and sometimes impossible demands.

An owner’s representative that is knowledgeable and fair can discuss the work with both parties and determine what is a fair payment for the work done.

The contractor who intentionally bids low

If it becomes apparent that the contractor intended to extract more money from the owner after signing the initial contract, then we need to be harder on this contractor. An owner’s representative can authoritatively state what cost should be for the work performed, then show proof that the contractor intended to raise the cost.

Since the relationship will by now be soured, the best option probably is to end the contract and hire a new contractor to finish the work. An experienced Owner’s Representative can take over construction as the Project Manager and either see it through completion, or set it up for a new contractor to take over.

The unqualified contractor

In the case of the unqualified contractor who took a job way over his ability, termination is often the best option, and the sooner the better.

The owner’s representative can advise the owners through this difficult process that requires:
Determining if any sub-contractors or and suppliers still need to be paid.
Getting lien releases from all major subs-contractors and material suppliers.
Studying the contract between the owner and contractor and advising the owner how to follow the procedures outlined in the contract, such as a 10 day notice letter
Give notice to the contractor to stop all work and not enter the site.
Secure all materials stored on site, so that any expensive equipment such as windows or appliances cannot be “repossessed” by the contractor.
The owner’s representative can attempt to mediate a final settlement. If this is not possible then an attorney can be brought in, with the owner’s representative providing all the relevant information to the attorney. Since these cases seldom go all the way to court, the advice of a knowledgeable owner’s representative is crucial in determining an outcome that allows the owner to be able to continue with a new contractor and complete the work.

Read More