Project Profitability: Project managers and specialized consultants

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    By Howard Birnberg

     A wide range of specialists has appeared on the construction scene in recent decades. Most are hired by clients to aid in cost control or provide management skills lacking in the owner’s organization. How successful these specialists are is a subject of some debate. At the core of this debate is a turf dispute on the part of other traditional industry consultants such as architects. These traditional consultants would like to preserve their role in the construction process, carve out new niches for themselves, and prevent new competitors from achieving a foothold. This issue would be of little consequence if traditional providers were meeting the needs of clients. Unfortunately, many are not.

    The traditionalists claim that the specialists are simply glib marketers praying on the fear and ignorance of owners. They also claim that cost savings are often illusionary as the additional layer of team members adds to communication problems, thus increasing or shifting costs. The specialists reply that they have developed their services based on the very real needs of owners. They also point out that traditional providers do not or will not offer the services clients need. Many owners also resent the attitude of architects and others that they are simply the rubes of slick marketers.

    Why have traditionalists failed to meet the real needs of clients? There are several reasons:

    Liability concerns head the list of many — Risk is a significant issue in the construction industry. Standard contracts are often written to shift or share risk with other parties. Many traditional providers are unwilling to assume risk for items such as construction costs and construction supervision.

    Fees are often inadequate for the level of risk required — Traditional providers such as architects argue that they are willing to assume greater risk for projects if the fees they are paid are high enough to compensate them for the risk. To many, it is a simple risk/reward equation.

    Many traditional providers lack the management skill, expertise, or staff to provide the services clients require — As a result, they are unable to embrace new services. Often, new or expanded services require training that is lacking in the education or experience of traditional consultants such as architects and engineers.

    Promoting what many traditionalists call non-traditional services requires new marketing approaches and skills that they lack — Clients are knowledgeable and are seeking cost control, attention to service, and management skill. While design is an important issue, it is often of secondary importance to many clients.

    Projects are much more complicated than found in the past — Technological change requires new expertise and services. For many buildings and projects, no one engineer or architect has all required expertise, necessitating the use of specialists.

    Specialists and generalists

    Who are some of these new (and not so new) specialists and generalists? They can be divided into two groups: project specific and generalists. The project-specific consultants include technology experts such as computer specialists, commissioning agents, and value engineers. Following are some of the types of generalists:

    Project management consultants are firms or individuals who specialize in managing a particular project for a client who lacks the skill, staff, time, or interest to do so. For example, a hospital adding a doctors’ office building might turn to a project management consultant to help define the scope, determine funding needs and devices, hire architects and engineers, and so on.

    A variation of this role is used by an increasing number of corporations and institutions that do not wish to hire their own employee project managers or facility managers. These organizations are outsourcing their work to contract project management firms that employ individuals to work on the corporation’s or institute’s projects. It gives corporations and institutions greater flexibility in handling work and does not lock them into commitments to employees, the payment of fringe benefits, and the like.

    Program management consultants are similar to project management consultants except that they may manage an entire building program. A school district undertaking a replacement program or adding a number of new schools, undertaking renovations or life safety work, etc. may hire this type of consultant to supplement its own staff or to provide the necessary expertise. Typically, these projects are undertaken over a number of years and in multiple locations. The client may lack sufficient staff to manage this work, but can effectively manage the work of the program management firm.

    Design-build firms are used by owners seeking one-stop shopping for both design and construction. The belief is that communication and cost control are improved when both activities occur within the same organization. A corporation requiring a new manufacturing facility may find this an effective approach. Design-build services have had tremendous growth in recent years and is now the delivery method of choice for many owners.

    However, a caution is necessary: Many design-build firms are actually a combination of two independent organizations allied to seek a project. This may call some of the possible benefits of the approach into question.

    Construction managers typically justify their fee by the cost savings they can identify during the design and construction process. This may occur based on a product substitution, alternative erection process, value engineering, or other methods. Construction managers can be effective for large, complex projects such as a significant public building, highway reconstruction, or other similar jobs. Most construction managers are commonly at-risk for the cost of construction. Some are not-at-risk and are hired simply for their expertise in managing construction projects or because of inadequate client staff.

    On not-at-risk projects, firms are typically paid a fee and are not exposed to loss or benefit based on the construction cost coming in above or below budget/expectation. In this case, the construction manager typically bills on an hourly basis for his or her time. I worked with one state agency that used this approach to supplement its own staff when workloads were high. It was expensive in the short term, but avoided permanent hiring.

    Architects are particularly effective in traditional design-bid-build situations where there is sufficient time for the structured process the name implies. Time and money must be allowed for design changes as the process unfolds.

    Engineers have many roles. Some are lead consultants on projects that are heavily civil in nature or may be primarily a mechanical engineering design project. Often, engineers serve as subconsultants to others and are down the food chain for fees, payments, and communication with the client.

    Each of these organizations typically has its own internal project manager to handle the work within its office and to coordinate with other consultants. The types of specialty consultants continues to grow and diversify, requiring good working relationships and communications to meet the needs of clients.


    Howard Birnberg is executive director of the Association for Project Managers (www.apminfo.com) and lead consultant for the APM subsidiary, Project Management Consultants. He may be reached at 312-664-2300 or hbirnberg@gmail.com.