Posts Tagged ‘real estate finance’

Everything is Temporary on a Construction Site

August 15, 2008

In a scene from Moonstruck Loretta’s father played by Vincent Gardenia in a rather exasperating moment proclaims “Everything is temporary!”  Truer words were never spoken, especially when it comes to a construction site (ironically, Gardenia’s character is a plumber.)

Everything in a construction site is temporary. The obvious – office trailers, porta-potties, etc. And the not-so-obvious – quality systems and business relationships.

In this setting, why would any principle project partner invest financially in an enduring quality system that becomes as important to the building as the foundation?   It just doesn’t pencil out.  As a result, I’ve seen contractors who use standalone spreadsheets (created from scratch by the Quality Manager) to record the conditions on $150 million projects.  To put this in perspective, imagine how absurd it would seem for a factory with a $50 million operating budget to similar ad-hoc documents.

It’s ultimately up to the fiduciary partners (banks and insurers) who have a longer term interest in the success of the building to demand better. Improved systems for recording and monitoring construction operations add significant value to a building  during its construction by providing a means to reduce defects. The payoff for such systems would continue over the useful life of the building as the details of construction remain fresh and accessible years after the last sections of temporary fencing having been hauled away.

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