Codes, Constraints And Costs: Navigating The Developer's Risk Landscape

Every developer faces the challenge of building an effective and successful project management framework with every project they tackle. 

To avoid costly mistakes, they must establish clear expectations for the entities involved along with an efficient decision-making management structure. If there is no clear plan on- or off-site, owners and developers may risk their return on investment through costly project delays and change orders. This includes but is not limited to legal costs, audit findings, inspection penalties, and the potential for fraud, waste and abuse — as well as claims from other external stakeholders. 

“One of the big mistakes I see is that animosity builds very early on in the development process,” said Phil Helmes, senior principal at SOCOTEC, a project advisory, architectural, engineering, construction and life safety consulting firm. “People must be flexible. They have to understand that the original plan is the starting point, and things will change. Being able to adapt and change your direction and, most importantly, make timely decisions is key to a successful project.” 

Bisnow spoke with Helmes, alongside SOCOTEC Technical Director Paul Esteve, principal Zaid Sultan and Managing Director Heath Whitaker to learn more about how developers can navigate project management structures, ensure code compliance, report project data effectively and spot project fraud and waste. 

Bisnow: What distinguishes a successful project management framework from one that struggles? 

Helmes: Owners, contractors and designers need to be aligned — that’s step one. From an owner's perspective, you want to identify team members who bring enthusiasm and experience to the specific type of project that you're developing. You want the assigned personnel to integrate well and work as a collaborative team focused on the fundamentals of quality, time, cost and safety. Check references on past projects, be comfortable with your team and make sure you can trust them to provide straightforward information.  They need to know your expectations, and you need to know their passion for the project. This is something people often overlook. 

The other aspect is to ensure that all participatory parties in executing the project assign competent decision-makers so that the project team can react appropriately based on what is known on a day-to-day basis. You can put some guardrails on that in terms of delegated authority, but they have to have decision-making in the field during the process,  particularly for the owner. The owner representative can't be a passive clerk.

Owners need to be involved in the process. There are a lot of people and vendors involved on these projects, and something's bound to go haywire. Owners need to be involved and realistic so they can adapt and change direction if needed. 

Bisnow: What are the most overlooked zoning and site constraint issues that can derail project plans later in the process? 

Esteve: From early on, you need to understand the boundaries of what you’re looking for. Sometimes you might have a simple site with plenty of space on all sides. Other times, you're working in dense areas that have small sites in unique areas where you’re trying to maximize the real estate, such as along water or over railways. 

You have to think about how that's going to fit into the code. Zoning might be one thing, but in terms of also looking at fire department access: how they can respond to emergencies on-site, how they plan out roadways or access to the building with site constraints, etc. That needs to be planned out early so that you can adjust the building’s size, shape, design expectations and more. You need to have a reasonable expectation of what you’re getting into zoning-wise, so your design can reflect that. 

Bisnow: How can project monitoring data be compiled and reported so it drives smarter decisions?

Whitaker: It’s important when you're setting up your monitoring for the project that you really make it fit for purpose. Every project is its own animal. Something is going to go wrong. What you want your monitoring tool to be is a tool that helps you maximize your return on investment. 

Between all the stakeholders, you want to make sure there is alignment. If you're the owner of a project, and it's a schedule-driven project, you need to make sure that your contractors are aware of that, and you need to be aware that if you start putting budget constraints on them, that's counterintuitive to this schedule-based driver. Sometimes you say one thing, and then you're pushing your contractors with a different goal, and that's when you get bogged down. 

Sometimes you get situations where contractors are fraudulent, or there's something that needs to be investigated, but the majority of the time everybody's working towards the same goal. 

Bisnow: What red flags can developers watch for to spot fraud or waste early in the development process? 

Sultan: There are five initial red flags that a developer can have in the back of their mind when setting up a project. The first is unexplained cost escalation. If, for any reason, your various suppliers or vendors start to have an increase in the material and labor costs without adequate market justification for it, that should raise some questions. 

The second is problematic change order patterns. Every transaction should have adequate documentation. When they come back with very vague descriptions, then one needs to start to look at that from a compliance or accounting perspective. 

The third is overreliance on a specific vendor. You may see that the subcontractor and the vendor are tied at the hip for virtually everything without proper justification for it. You should mark that as a red flag. 

The next is inconsistent reporting. This is when you're in the field and you're not getting project updates adequately or timely, or sometimes things aren’t even reported.

The last is what we call lifestyle red flags. If a project manager or subcontractor shows up at the job early on, driving maybe a beat-up pickup truck, and then six months later, they're flying high with a new, expensive car, that's a red flag. 

Bisnow: How can outside partners like SOCOTEC provide value in navigating these risks that in-house teams may miss?

Helmes: We're a resource pool with multidisciplinary capabilities. Getting us engaged early doesn't mean paying us early. We should be on your bench early on. We often see people call us after the problem has already happened, but by then you’re already late to the game.

Sultan: What’s unique about SOCOTEC is that we can combine our various skills into one platform. We can come in at the initiation phase of the project, identify any red flags, provide an overview of the project management, evaluate the project finances and more. We do it all in-house.

This article was produced in collaboration between SOCOTEC and Studio B. Bisnow news staff was not involved in the production of this content.

Studio B is Bisnow’s in-house content and design studio. To learn more about how Studio B can help your team, reach out to studio@bisnow.com.