Fulcrum, Llc

The real estate and construction industry is rapidly evolving in the wake of advancing technologies that enable faster and efficient construction. Diversified methods of construction, material manufacturing, and workflow solutions, to name a few, promises to take the industry to newer heights. Conversely, the pandemic has jolted the industry in several areas. Progression out of the pandemic will continue to show material price fluctuations, labor challenges, and budgeting variables. This cause-and-effect places increased emphasis on Construction Risk Management to address the potential impacts on costs, scheduling, quality, and safety. Let’s explore the future of Construction Risk Management from a variety of perspectives.

Construction Project Management

2020 was an eye-opening year in the construction world. We saw a chain reaction throughout the industry resulting in new rules of engagement, uncertainty, and questioning of means and methods. This was a challenge that many project delivery teams elected to wait out, while others pushed forward with evolving restrictions and new protocols in tow Looking ahead, Construction Project Management will have different and enhanced emphasis. It will be streamlined in process and operation to effectively use the resources to their fullest and more focused to readily recognize potential risks as events occur.

With this, the importance of our digital world and virtual platforms will expand. That will lead to additional needs for technology infrastructure and integrity. Onsite teams will need to effectively communicate with the offsite teams through user-friendly management software and tools.”

Construction Cost Comparisons

Global fluctuations of labor and materials, supply chain disruptions, and general market trends have greatly increased the benefit of the cost comparison analysis. Cost comparisons are a good way to provide an indicator of the status of a project budget and/or to support the validity of a project utilizing historical and current costs and trends to better assess the investment. Indexing line items against historical pricing provides the ability to confidently adapt to an uncertain and changing landscape.

Currently, lumber is a big-ticket item that has experienced a steep cost escalation, with costs of other materials such as steel, drywall, electrical components, and concrete also increasing. Will this trend continue, revert to the historic trend line, undergo regulatory price restrictions, or stabilize at a “new normal”?

Fulcrum has an active in-house cost database of project budgets nationwide to analyze cost impacts for many of these cost fluctuations. Further, Fulcrum is in constant dialogue with project delivery team members addressing issues such as these material impacts that can be a source to make educated decisions when pricing a project.

Page Turn / Peer Review

The future of construction risk management will continue to include Page Turn/ Peer Reviews. It has continually been industry standard to have a complex set of construction drawings reviewed by various consultants for errors, inaccuracies, and coordination issues. As an effect of the pandemic, this quality control measure will be even more prudent.

Let’s take a deeper look at the effects of the pandemic, which include staff reduction and changes, new software implementation, exploration of alternative construction methods, and evolving code/inspection requirement adaptations. These impacts have resulted in the need for additional oversight regarding the construction drawings and coordination. Staff reduction has caused firms to expedite workload resulting in additional errors and omissions within the drawings. In addition, working from home can decrease channels of communication resulting in less standardized collaboration of a Quality Control exercise that greatly benefits and depends on adequate collaboration.

Many firms have invested in new software solutions to help increase workflow efficiency, which can be quite a learning curve, especially to those firms that are already understaffed. With the abnormal fluctuations of pricing, developers and builders are seeking alternative construction methods which initially may look attractive on paper, but without the hands-on experience, will inevitably result in problems with the drawings and coordination of disciplines. Lastly, the pandemic has realized changes to code/inspection requirements, which can adversely impact or flip a construction project upside down if not mitigated and managed effectively.

Page Turns / Peer Reviews may be completed internally. However, for a true examination of cost savings and time, a third party should preferably perform this exercise to get an independent and fresh perspective on the project. Fulcrum holds the practical knowledge of a vast variety of projects across the country. A core value throughout all of our services is to have a thorough quality control process in place.

Fulcrum looks at the constructability, legibility/readability of drawings, completeness, functionality, code compliance, coordination, and logistics of future planning.” This approach assists with the project being documented cost-effectively through the removal of errors and omission cost impacts, identifying manageable allowances, and reducing the time and expense of RFIs. In return, the schedule is less impacted, and the project becomes more efficient.

Scheduling

Project scheduling, including the active management of project schedules, is becoming even more valuable to the success of a project. Competition for resources, along with increases in material costs and material and equipment lead times, present an environment wherein projects that develop and maintain solid construction schedules outperform those that don’t.

As many firms are battling staffing issues, the benefit of retaining a third-party consultant to offset staff constraints early on and to develop an adequate schedule alongside stakeholders will increase overall productivity and efficiency in scheduling practices. “The early development of the construction schedule can help identify and manage critical path activities, long lead items, potential conflicts, and possibly accelerate certain opportunities,” mentions Coyle.

Construction schedules require regular updates to be an effective tool. Additionally, the inconsistency of pricing, resource availability, and other items mentioned above present the need for ongoing analysis and updates to the schedule. The importance of having experience with not only previous projects but ongoing projects allows for the identification of trends and events that can negatively impact a project.

QA / QC

Going forward, QA/QC will encompass advanced construction methods that are rapidly displacing traditional methods. Examples include exterior envelope systems vs. standard sheathing, prefab framing vs. stick framing, and modular utilization vs. individual components. Municipalities are increasing scrutiny of construction and requiring more frequent and detailed inspections. Third-party QA/QC services provide many benefits, including input on affected issues and deficiency comments before inspections occur.

QA/QC services will prove especially valuable in the post-COVID world for many reasons, chiefly to include the increasing need to minimize and/or eliminate the need for rework.

The ever-rising cost of building materials, the unfortunate event of inadequate quality or failed testing, and subsequent required demolition and rework will have an even greater effect on project costs. Additional oversight may be needed for offsite stored materials, as builders may be purchasing materials sooner in response to abnormal pricing volatility. These impacts will place a heavy burden on firms to monitor a variety of atypical procurement practices and increase the need for additional QA/QC oversight.

Modular Construction

Never before has effective risk management been more important in real estate development and construction. With skyrocketing pricing of certain building materials, short supply of other commodities such as doors, appliances, and other equipment, and critically low labor/contractor availability in certain areas as an effect of the COVID-19 pandemic, effective construction risk management can be the paper-thin line between keeping your construction triangle (Time, Cost, and Quality) intact or watching it break apart as you see influences outside of your control start to erode the success of your project.

For development teams to hold the line and – if it were at all possible in this current environment – to find themselves on the positive side of the equation, they must find an advantage. Volumetric modular can be that game-changing advantage. With the introduction of robotics and automation and the naturally safer, more separated, and more efficient workforce in the factory-built environment, offsite volumetric construction is evolving as a “COVID-BUSTER”! However, to avoid the increased risks due to the above mentioned contractor/labor shortages, escalating building material pricing, short supply of other commodities (combined with several risk factors inherent to volumetric modular), as well as the inefficiencies that are a result of COVID-related protocols/procedures, modular construction requires a very disciplined approach with a huge emphasis on design, scope, and project delivery team decisions being made in the early stages of the Pre-construction phase. Having an effective modular construction risk management firm such as Fulcrum, which has a deep understanding of the potential and very real risks and pitfalls of modular construction, is a must! The ability to identify potential project risks related to (among several other things) funding, architecture and design decisions, team selection, transportation, staging logistics, craning and set-up, and the coordination of offsite and onsite teams before they jeopardize your project’s success is the difference between a modular success story and a modular cautionary tale. Let Fulcrum help you be the former, not the latter!

The future of successful hospitality, multi-family, and even single-family development is trending heavily toward volumetric modular. Fulcrum’s Modular Team can assist you in selecting a modular delivery team (architect, manufacturing partner, transporter, set-up contractor, and general contractor) that’s right for your project and help you manage that team’s successful coordination from the Due Diligence phase through occupancy. With a national footprint, familiarity with the financial as well as construction aspects of the project, and a strong nationwide network of lenders, investors, modular suppliers, and contractors, Fulcrum can help you achieve your greatest success at a time when others are struggling to maintain the status quo.

The pandemic presented a variety of challenges affecting many facets of construction discussed above. As we continue our way out of the pandemic, Construction Risk Management will be more important than ever. Having a third-party consultant familiar with best practices and the ever-changing evolvement of the industry can greatly contribute to the success of a project.