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Time Value of Money & Construction Quality Decisions

Time/Quality/Money – pick 2!  That is a simple way to frame the decisions that owners of construction projects face.  The situations often seem murky, but at their root the choice is the same.  While bettering quality and saving money have an inverse relationship, time pressures frequently complicate decisions.

Say the preferred material is only available across the country or across an ocean; the decision becomes a tradeoff between time and money.  Surface freight or airfreight mean three weeks or three days.  If the material is needed right away to stay on schedule, the difference of 12 working days (which means 16 to 18 calendar days) means not only delaying completion but also the extended cost of keeping the job open.  Those costs usually accrue each working day and include:  supervisor pay and fringes, renting the job office, truck, dumpsters, port-a-potties, utility charges, and other incidentals.  These costs can easily add up to $600 to $1000 per day.  In the worst case, delays that push the project into bad weather before it can be protected are almost unquantifiable.

Beyond the direct project costs, there is the owner’s loss of use of the project for the delay period.   Sometimes airfreight or choosing something else readily available is worth it.  Other times it is a false dilemma because other events may or will overwhelm the impact of a single decision.  That is why calm, reasoned analysis and good communications between the owner, design team, and builder lead to the best decisions.

As briefly described above, these sorts of decisions are not simple A or B choices.  To plagiarize the famous philosopher Donald Rumsfeld, beyond the known and unknown variables, there are the unknown-unknowns.   The best option is to avoid these situations as often as possible.  Unfortunately, in construction some of these tough choices arise from circumstances beyond anyone’s control or influence, so here are some ideas to reduce your headaches and stomach acid where you can:

  1. Plan out procurement at the beginning of the project, selecting long lead-time products like doors, windows, repurposed materials, and custom-made or unusual size products early.  Even if a few items in an order change later, working around an isolated situation is a lot less painful than the job grinding to a complete halt.  Since there are thousands of decisions for an owner to make on most construction projects, from small ones to large ones, having some anchor decisions to reference actually makes the later choices easier.
  2. Place material orders way in advance of what seems necessary.  Those selling a particular product are tempted to quote optimistic delivery dates to get an order.  It is not unreasonable to expect deliveries to take twice as long as quoted.  The worst result is that you need to find a place to store materials that miraculously arrive as promised.
  3. Inspect materials as they arrive, not as they are needed.  This practice needs to include subcontractors and suppliers as well.  Too often, the packaging is opened to find the wrong color, texture or size, not to mention glaring defects.
  4. Resist re-making decisions.  Since a project can extend over a long period, new technologies, products, and finishes will undoubtedly appear. There are two reasons to avoid the temptation to reach for the newest thing:  (1) Think of the Winchester Mystery House that never was completed and (2) Sometimes the latest is not the greatest.  I have seen way too many products that did not stand up for the decades that construction products need to.  A few examples I can think of are early bamboo flooring, Hardi-Shake roofing, and Eisenwall stucco.   Let someone else be on the bleeding edge.  Plus, the cost of successful products will usually come down in a few years.

As a project owner, not all of these actions are under your complete control.  However, you can influence the other team members by setting a good example and letting them know your expectations.   If you find yourself feeling like the shuttlecock in a badminton game, something is wrong with the process.  Your contractor and architect should lay out the decisions you need to make in priority order based on when they are needed and how long delivery will take.  You probably will need to make related decisions at the same time even though only certain components are critical.  For example, it is hard to build the kitchen cabinets until all the appliances are selected.  Just remember:  Time, quality, and money are intertwined — pick 2.

For more information about our home and commercial construction services, please contact our team today!

Jay True, former vice-president of JMA, became partners with Jim Murphy in 1987. In 2015, Jay and his wife Elaine True, our office manager, retired from JMA and moved to Michigan to escape the cool summers and warm winters in Santa Rosa.