Business, Construction, Design, Property Development, Risk Management, Trends

The Value Proposition of Money

February 15, 2015

Written Jointly by Phil Macey – National Director Collaborative Project Delivery
JE Dunn,
and
James (Jim) McGibney-Development Services Consulting and Support
Commercial and Industrial Facilities

Introduction

In a very recent discussion with a friend (and competitor) in project development, we were discussing a project that had failed. The permit was in hand, the contractor selected, the contractor’s legal work was done, but the project did not get their construction loan funded. It was a project that seemed to make good sense so I asked why it had failed. My friend said simply, “they had secured the wrong kind of money”. That meant, any one of a number of variables weren’t going to be acceptable.

“Money” is a defining parameter in a project and is also a basic resource that needs to be in place well before work on your project commences. A banker I have worked with over several years, Dan Sheehan of Commerce Bank, sets the basic philosophy the project team members should bring to each project and their view of the project costs as follows:

“From my banker’s perspective, a financially successful project will depend largely on the type of owner — ie. whether it be an REIT, corporate/owner-user, individual investor, equity fund, government-owned, etc. Each has their own separate criteria for return on and return of investment. I know of some corporations who want to make a statement by designing buildings that may be architectural wonders and testaments to big egos but very inefficient and with a limited universe of potential buyers if the property were to be sold. I think both of us could point to some buildings here in the Denver area where costs didn’t seem to matter. For the vast majority of owners though, costs do matter because of the impact they have on the return on capital, and cost-conscious design teams and GCs need to have this cost-consciousness at the forefront of their minds.”

We are approaching this topic in two separate posts. This initial post looks at the basics of money and the kind of attributes and constraints that differentiate the type of money being used on each project, and that the owner and team must understand as they proceed from design thru occupancy and operation. In the second post we will explore the distinctly different attitudes towards money that each team member brings to their portion of the development process from owner to the design team to the contractor and, of course, to the financing entities.

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Business, Construction, Design, Property Development, Risk Management

Managing Risk in Development, Design and Construction

December 30, 2014

Introduction

Risk Management is an inherent part of any business, but it is especially important when you work in the “Built Environment” which includes Development Services, Architectural and Engineering Design and Construction. It was less than 25 years ago that deaths on a job site were not unusual. On the Hoover Dam project, 96 people died on the job site during construction and that barely merited press coverage. Construction was a lot like going to war and some losses were “inevitable”.

That attitude has changed completely in the last 25 years and today any injury—any near miss- is considered a significant problem. Each incident is investigated and a formal report is filed showing steps being taken to avoid the incident in the future. Job-Site safety programs are enforced rigorously and are critical to a contractor’s long term business.
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Business, Construction, Design, Property Development, Technology, Trends

How is Technology Reshaping the Legal Needs of Development Projects?

December 11, 2014

Introduction

Construction law has always been complicated, very dependent on Case Law, which is the body of past legal decisions, and very slow to change. A significant number of the legal documents were generated by the American Association of Architects, the Professional Engineering Societies and agencies of the Federal Government. Changes have been driven by the needs of the General Contracting and Subcontracting communities through the Associated General Contractors, AGC, and the Various Subcontractor oriented Societies. The extensive use of precedent in determining legal strategies has resulted in a professional service that changed very slowly and very deliberatively. Today, the speed of technological change within the Development, Design and Construction professions is out of synch with the slowly changing legal professions but that is changing.

Technology is now reshaping the legal profession, and it is especially noticeable in the Commercial Development/Design and Construction industries. In this Posting we will address;
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Business, Construction, Design, Technology, Trends, Uncategorized

Design and Construction Using Prefabricated Systems- Part 2

December 3, 2014

This is the second of a 3 Post series on using prefabricated systems in design and construction. This Post explores one of the most significant areas of productivity improvement in the design and construction of complex structures–the use of multi-discipline, multi-trade prefabrication.

In Post 1, we discussed the design and installation of a Variable Refrigerant Flow (VRF) heating and cooling system. That system was manufactured by a single Company, Mitsubishi. It was also (essentially) designed by Mitsubishi and the local installation was done by competent, regional, Mechanical system subcontractors, M-Tech and Heating & Plumbing Engineers (HPE) with support from a local Electrical Subcontractor. In fact, most projects, today include a number of similar systems that are pre-fabricated off site and then installed at the project. The majority of the examples are in the single trades of Mechanical, Electrical and Structural subcontracting. The use of single trade pre-fabrication is now accepted as an integral part of those subcontractors’ business, and we should expect to see it used much more often.

The major productivity gain in design and construction in the future may be in the use of multi-trade/ multi-discipline pre-fabrication for complex systems. Essentially this is the bringing together of several different trades and contractors or subcontractors in a fabrication/ manufacturing environment. In that space they work together building any number of complete assemblies such as a patient room headwall system. The key is the work environment can include all disciplines working at the same time on a single, repeating building assembly.
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Business, Construction, Design, Technology, Trends, Uncategorized

Design and Construction Using Pre-Fabricated Systems- Part 1

November 19, 2014

Introduction
A growing source of productivity in the Design and Construction Industry is the use of prefabricated systems or materials. These can range from a simple wall section that is built off-site and then set into place– to the complete structural system of the building, which can be designed and cut (assuming a steel structure) off-site then assembled on site. Prefabricated systems and materials offer a host of benefits to each project including;

– The material can be assembled in a controlled environment which provides a much higher level of quality control.
– The systems can have all plumbing, wiring, and finishes installed in a clean environment, then all of the systems can be tested and inspected—before they arrive on site. This is especially useful when the system might be used in a specialized environment like a hospital, or with repetitive assemblies that require a more rigorous inspection.
-The manufacturer might be the designer and builder of the system for a specific building, then it is simply installed and final tested on site—which can simplify the installation, testing and warranty period. This leaves the manufacturer the option of offering and providing long term maintenance, and even of the option of “leasing” that component.

McGraw Hill has a free document discussing the impact of prefabrication in much greater detail at http://construction.com/market_research/FreeReport/PrefabSMR/.
In a time when craft labor is becoming more scarce- like today—the ability to manufacture systems and materials in a clean environment typically leads to a better, more productive use of the available, labor pool, and provides an environment where the craft labor component becomes less thru the use of automated processes and robotics.
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Business, Property Development, Technology, Trends, Uncategorized

Thoughts on Innovation, Productivity and Jobs

November 14, 2014

The basic tenant of the Gordian Views web-site is outlined on the “About Page”. Simply stated it is that Innovation is finally coming to the Development, Design and Construction Industries.

As I noted on that page, “Today, as we watch each new technology breakthrough introduce change in the development industry, we are seeing jobs disappear or diminish, which we would expect. The increased productivity is a boon to the owners and users of the facilities we build and the productivity is good for our countries as it keeps us all competitive. The negative impact is that this time, those jobs are not being replaced. ”
As I have written each successive Post, it has become clear that the premise is correct, mostly—Innovation is pervasive in our Industry and major change is underway. It is also apparent there are firms that are embracing that change and putting it to work right now, other firms are studying the tools and dipping their toes into “water”, and a third group that is opting out in some fashion. The opt-out may be to retire, or it might be to work to become a consultant in one area of specialization, or simply changing to another industry where the pace of change is not so fast.
The difficulty for those who are embracing the changing technology—me included—is to understand what level of change is really underway, on what time line and how to filter the data I receive. Do we need to be making massive investments of time and capital today, and start changing our business models, or is there another- perhaps more rational approach we should be considering. Finding a believable data set that supports any approach has been difficult– but not impossible.
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Business, Construction, Design, Property Development, Technology

The Development Professions- Commodity Technology or a Growing Value Add?

November 5, 2014

The Project Team – A growing package of commodity services or an evolving value-added business strategy that will continue to serve owners well?

I graduated from College in the 1970’s, first with a degree in Electrical Engineering and then with a dual MBA/ MSIE (Industrial Engineering) degree. Like Engineering students today, I worked long hours for each degree, often in night classes and more often, remotely because of an especially aggressive, professional travel schedule. With each degree, I found that I had only touched the surface of the subject matter and learning became a life-long focus and passion.

It was a unique time in technology as I moved from drafting tables, mylar drawings, rapidograph pens, slide rules and TI Calculators, to increasingly complex computer based tools. The first flatbed plotter was eye-opening because the floor plans then had multiple overlays—one for each discipline— and keeping the backgrounds up-to-date was no longer an issue— it was automatic. We saved time on every project and the documents were more uniform and professional. A heretofor critical part of the professional team, the draftsperson, began to disappear. That position was being replaced by a knowledgeable computer operator—often a graduate engineer or architect whose skill set went well beyond drafting.
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Business, Technology, Trends

The Internet of Everything

October 28, 2014

The Internet of Things

There is a great deal written and being written about the Internet of Things (IoT), and this posting will focus on recent changes and publications. The internet of things (IoT) is rapidly becoming a part of our daily home lives with home based devices, and will soon be a part of our daily professional lives and more than likely it will change the business models of our companies.

So what is the IoT? You can find an excellent summary of the IoT on Wikipedia at;

http://en.wikipedia.org/wiki/Internet_of_Things

A simple summary is it is the advanced connection of devices, systems, and services– perhaps more. It is the ability to connect your refrigerator to the internet or the ability to connect the management system you have developed for your family farm to the internet and install an autonomous management protocol on that farm management system. It is what you need it to be and the impact is and will continue to be quite amazing. Today’s internet can support the addressing (providing a unique internet address) and management of 26 billion devices. If forecasts are correct, we will hit that limit well before 2020. The new Internet Protocol, IPV6, which is in the acceptance process, will support the addressing of between 50 and 100 Trillion devices. That provides growth for IoT well beyond 2020.

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Technology

Robotics: What role will they play on your project?

October 20, 2014

When used smartly, robotics are the ultimate automation tool on the job site — and for every design team to consider.

One and a half years ago, I had the great good fortune to visit and tour the Hyundai Auto Production Plant in Asan, Korea. The visit was sponsored by the Ministry of Foreign Affairs and I appreciated that the tour was very thorough. At that time the product was the Sonata and they were completing one car per minute. The deeply impressive fact was that each car was different. They had different interiors, different colors, different power plants, etc. That diversity was possible, in part, due to the extensive use of robotics throughout the plant. Robots literally took the steel from the rolling mills, and formed it into doors, car bodies, etc. The most complex component in the car, the power plant, was imported as an assembled unit. Those power-plants varied from a simple 4 cylinder, automatic, to a hybrid power plant—and each found its way into the correct car during the production process.
The plant also had a very sophisticated painting operation, including robotically managed QA/QC for paint quality. The plant was a very high bay plant and they had a number of “lights out” operations in the upper areas. Continue Reading…

Property Development

Assessing development risks

October 15, 2014

If I were starting a project today as the Development Manager, one of the first things I would want to understand is what are the strategic development risks that I must mitigate and manage for the project to be successful. I believe strongly that the developers and every other team member must be risk averse.

Rather than developing a long list of all project risks complete with a mitigation plan, I typically focus in 4 strategic areas: Continue Reading…