Cost Reduction Strategies for Tight Economic Times

Is your school construction budget reaching its full potential? With today’s rapidly rising construction costs, the pressure has never been greater to leverage the funds you have to meet your facility needs. Successful leaders in education make sure that money allocated to school construction is used in the most cost-effective manner possible. In recent years, the public and political environment has further increased the emphasis on frugal spending. Since 2000, the per-square-foot cost of new school construction has tripled the rate of general inflation. In 1999, an average elementary school cost $100 per square foot to build. By 2014, that cost had risen to over $211 per square foot. In the Charlotte region, construction costs have increased by approximately 20% in the past 12–18 months with regional contractors predicting a steady increase for the near future.

Finding the funds to pay for needed capital improvements, as well as paying for teachers and operational expenses, is a challenging and delicate matter. Capital funds typically come from two sources: an annual capital budget based on tax revenue millage or a bond-financed, capital impact program. The physical facility needs of most school systems cannot be met, let alone maintained, without some level of additional capital improvement funding beyond their annual capital replacement allotment.

Every parent and school leader want nothing short of excellence when it comes to the quality and safety of the facilities where their children are educated. Because of these demands, stretching school construction dollars is crucial. In that spirit, we offer the following strategies to make sure those dollars are spent wisely.

J.M. Cope’s Guiding Principles for Reducing Costs on Your Next Construction Project:

  1. Control costs from the beginning – establish a firm Construction Contract Award Budget (CCAB) for each project. The CCAB should be the expected cost on bid day without contingencies. Establish this budget for each project before Architect selection if possible. It is essential to not only start out “in budget” but to also implement a cost control program that keeps the project within that budget. The Owner should set their CCAB with no design contingency included.
  2. Use the design contract for cost management. Clarify in the Architect’s contract that the CCAB is the maximum amount available for the construction contract award and that cost control is a dual responsibility. The Architect must work with the school system to achieve the results needed and to stay within the budget parameters. At each phase of design submission, accurate professional estimates should be obtained from the designer or a third-party source. And, if an estimated cost to budget comparison indicates a cost overrun, the variance must be discussed with the school system leadership and value engineering tactics must be used to resolve the variance before moving to the next design phase. The school administrators and Architect should work together to analyze the problem and find a solution within the CCAB parameters. Consider making the Architect’s responsibility “to stay in budget” a contractual responsibility and a prerequisite for approval of the designer’s payment.
  3. Identify the environmental, jurisdictional and community priorities for each project prior to the commencement of design. Document project priorities prior to the schematic design phase. Work with your team to challenge jurisdictional requirements that seem overreaching and unreasonable.
  4. Conduct a “Value Engineering Analysis”. Value Engineering should be conducted at each phase of the design process and prior to bidding. This process can easily reduce costs by 2–5%. Items to consider or prioritize during the Value Engineering Analysis include:
    1. Reducing size and maximizing space; work and rework space organization to improve efficiency.
      1. Reductions should be prioritized, starting with spaces that have the least impact on learning, such as:
        • 1st – Circulation space
        • 2nd – Core facility space
        • 3rd – Classrooms
      2. This effort results in the most cost savings. Make these reductions without deleting program space. Instead, search for ways to do the same work in a smaller space. Square footage standards vary widely over the country and there in not a one-to-one correlation between the size of these spaces and educational outcomes.
      3. Reducing necessary teaching space by using flexible/multiple-use space, smaller spaces, or creative scheduling to maximize utilization efficiency.
      4. Identifying program support spaces that can be potentially deleted if funding runs short and make those items Bid Alternates.
      5. Locating equipment on roof tops to save mechanical room space inside the building. Balance the cost of doing this by taking into consideration added cost to carry the equipment weight, roof screens and other roof top enclosures that may be required.
    2. Reducing the scope of renovation work. What can be refreshed? What quality is acceptable? See Strategy #10 below.
    3. Minimizing wall heights, thicknesses, assemblies.
    4. Reducing quantities when practical.
    5. Evaluating material options to reduce cost.
    6. Considering alternative options on high-dollar, sophisticated systems (HVAC, Controls, Energy Management, Security).
    7. Reducing site work scope – Eliminating excess parking, grading, retaining walls, storm drainage and road work where possible.
    8. Evaluating foundation and structural system designs to reduce cost based on soil and seismic class.
  5. Conduct constructability reviews. Reviews of plans and specifications should be conducted during each phase of the design process and prior to bidding. This process can also reduce costs another 2–5%. Use these reviews to:
    1. Identify and eliminate errors and omissions in the documents
    2. Simplify details and clarify incomplete details for wall and floor assemblies
    3. Enhance mechanical and electrical coordination
  6. Institute proactive risk prevention. At the start of design, identify and quantify risk whenever possible.
    1. Obtain preliminary soils report – Extraordinary site costs due to the quality of existing soil or unusual site conditions need to be identified early. Designs need to be carefully evaluated to minimize cost due to poor soil. Specify how to mitigate a soil problem in the bid documents.
    2. Modular Swing Space – Conduct cost/benefit analysis on the use of modular unit swing space versus extended general conditions. Which cost more? If extended General Conditions associated with a longer construction time is less, is there enough time?
  7. Peer reviews. Particularly in larger projects, the savings accrued by catching coordination or constructability issues at the design phase far outweigh the fees associated with peer reviews.
  8. Delay impact analysis. Is it truly worth the added designer cost and time lost to make changes that require redesign to achieve savings? Evaluate the impact market conditions will have on the cost as designed now versus the cost of the redesigned work procured later.
  9. Establish a set of master specifications with quality expectations. The following are examples that can lead to cost savings and improved outcomes:
    1. Electrical and Plumbing design guidelines –Reductions in lighting can be achieved with some “day lighting.” Plumbing guidelines should be examined to consider the use of schedule 40 PVC for site, sewer, and water lines.
    2. Technology and communications – Wiring costs continue to rise. Explore cost reduction tactics.
    3. Furniture, Fixtures & Equipment (FF&E) – Renovation project FF&E budgets are often minimal. Consider bidding FF&E instead of sole sourcing FF&E through a state contract. New projects require purchasing only what is needed and carefully choosing office and media furniture based on cost.
  10. Renovation projects should be evaluated as follows:
    1. Conduct more thorough site/building evaluations/inspections as part of design to eliminate unforeseen conditions. Prepare a checklist of systems and existing conditions to be checked. Always check above ceiling, in chases and in manholes. Where there are concerns for concealed elements, perform selective demolition to observe suspected problem areas.
    2. Are there areas in the existing building that do not need any work? List what needs to be done and does not need to be done.
    3. Are there areas that only need cosmetic work?
    4. Can cosmetic work be eliminated in any area?
    5. Are there areas that only need MEP systems work?
    6. Consider a “pre-design” HVAC system; review and analysis to determine if a total upgrade of HVAC is truly needed.
  11. Plan your new work so completion occurs at the start of summer break. The start of summer break versus the end ensures you have time to commission the school before occupying as well as time to complete delayed work and minimize acceleration claims.
  12. Consider alternative project delivery systems. Consider CM at Risk, Design-Build, and multi-prime vs. single prime. Define when it would be an advantage to use multi-prime?
  13. Establish a robust bid outreach promotional campaign. This will ensure enough quality bidders. Implement marketing strategies to keep interest alive.
  14. Consider forming a team composed of program or construction management staff, designers, engineers, and school facilities project personnel. This team can use these principles to evaluate and prioritize each project to systematically apply aggressive cost reduction strategies throughout each phase of the project from design through construction. The team can also coordinate the planning of multiple projects within a system to discover cost savings in financing, bidding, and other facets of construction.


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