Investment costs: a plus which brings a minus
According to analysts, the number of real estate investments financed by European Union grants may be set to grow in the areas of industry, commerce, services and agriculture in the next six to eight months. One of the reasons may be the rescheduling of the remaining funds.
If you are considering making an investment, with or without a grant, we asked Péter Hársfalvi, managing director of Aktuál Bau Kft, a company with several decades of experience as a general contractor, to point out a few things that can help ensure that costs can be managed, deadlines met, implementation smooth and that the results meet the client’s expectations.
According to our expert, an apparent increase in costs can eventually result in savings in costs in many cases, and the use of the most advanced technology may incur extra costs too.
“Many years ago, an American investor we were working with on the construction of its production facility in Hungary said I should only offer as much as is needed for normal production and nothing more because anything above that would mean unnecessary extra costs,” he explained. “During these consultations, it becomes really important to understand that one of the cornerstones of cooperation between the architect, contractor and client is to come up with the best solution.”
Let’s see why.
Extra costs or a reduction in costs
When it turns out during the tender for construction that the investor cannot finance the implementation costs, or that it is not worth financing them, the architect often comes under pressure to simplify the plans and the contractor to reduce the costs, which often leads to incomplete solutions.
The expert says that the first plans often include the client’s dreams drawn by the architect, which is the most that can be done both from an aesthetic and a technical point of view.
The contractor and the reality of the budget only come into the picture later.
Of course, we are not talking about those buildings that bear an important company message in their outward appearance but about clients who are particularly cost-sensitive, and these clients constitute the majority, at least in the case of supported investments.
“Our experience shows that there are two ways to find a good solution quickly and cost-effectively.
One is if the contractor is involved as early as the planning process – and thus knows the available budget – and provides support to the investor and the architect both on technological and technical issues.
Investors often rule this out due to the need or requirement for a tender procedure. In such a case, we recommend hiring a separate company for coordination, commonly known as a construction management company, which at first glance may seem to be an extra cost.
Our own experience, however, proves just the opposite: ultimately, this option has always led to rationalization and savings in costs as we have managed to get an independent expert involved in time, not to mention the advantage of being able to control the time factor.
All this becomes possible if the construction management company not only oversees implementation but also coordinates the work of the architect and the general contractor on the client’s behalf.”
An independent expert can come in handy to control the costs and take a different approach to technological issues. For example, you need to carefully plan the installation of devices that can utilize renewable or geothermal energy if you want to achieve real cost savings.
We often see, however, that the reason for it is, in some cases, the wish to comply with a wrongly interpreted regulation, principle or invitation for tenders.
Ill-proportioned use of time
The service life of a building, depending on the technology, is between 30 and 50 years. Yet clients often impose an unjustifiably tight deadline on the contractor and punish any delays with severe penalties.
It is often difficult to meet deadlines in the construction industry, and in addition to many other factors, there may be objective reasons for this. According to Hársfalvi, the optimal implementation time is not meant to make it easy for the contractor but rather to ensure high-quality implementation, which can also increase the service life of the building and reduce the number of warranty issues.
“It is only partly true that a well-prepared investment can be completed quickly. In some cases, after an unreasonably long decision process taking as much as two-three years, only three-four months were left for construction without any reserve in time.
Therefore, external factors such as the weather were not taken into account either. Although we strive to deliver maximum performance in every case, certain inaccuracies are hard to avoid, and the client might be disappointed in the end.
Moreover, it has happened before that the building, which was completed under a tight schedule, was left vacant for months because the client, due to other – technological or production-related reasons – was unable to put it into operation.”
“No matter how simple the building is, it has to meet a number of economic, technological, regulatory and, quite often, aesthetic requirements as well.
When we are responsible for the construction work as a general contractor, an independent staff supports our work. We try to devote as much time as needed to construction and provide alternatives to the customer that offer different technological as well as technical solutions. Our profession also requires time for the creative process, which ultimately produces savings in costs and, more importantly, better solutions and more satisfied clients.”
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