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The ensuing domino effect of the COVID-19 pandemic has resulted in many projects that are delayed and running significantly over budget, creating market demand for new strategies that address the growing dilemma hampering developers from coast to coast. 

This push for more efficient timelines, budgets and communication techniques is fueling an ongoing boom for third-party program management providers that possess the industry know-how needed to implement effective cost controls and a manageable schedule while also serving as the eyes and ears of the owner in all aspects of a project. 

By quickly evaluating and accommodating client needs, while also creating a detailed assessment of budgetary items and potential variables from general contractors and other project partners on the front end, many owners have determined that the program management model is the most efficient way to manage a capital building campaign from beginning to end.

Trusted third-party program management providers have the common denominator of hands-on field experience in general contracting, as well as being in touch with the intricacies and realities present in each project line item. The duty of program management firms is to bridge the gap and language barriers that exist between the owner’s industry and the construction industry by facilitating constructive communication and developing a plan that sets clear goals and benchmarks toward a final objective agreed upon by all parties before a hammer hits the first nail. 

The level of experience and expertise possessed by this new breed of program manager creates a deeper level of responsibility and accountability for general contractors and subcontractors, but also provides assurance for construction partners that they have an ambassador who speaks the common language and can push owners when needed to avoid costly schedule delays and last-minute changes. 

An effective program manager works collaboratively with all project partners, making the process more efficient for stakeholders while ensuring the best and most cost-effective solution for the owner.

Preconstruction Services

One of the main business drivers for third-party program management providers is a comprehensive offering of preconstruction services. Many general contractors just see preconstruction as trying to put a number on what an architect has drawn, but conditions in the present environment necessitate a multitude of services that can address the growing list of questions and concerns from the ownership side before actual work begins. 

The wide range of preconstruction services includes bid packaging strategy, feasibility studies, cost analyses, estimating and financing, master scheduling, as well as design team structure and selection. 

Within each of those categories, there should be a knowledgeable field general who takes oversight. For example, HPM, a program management firm, recently expanded its preconstruction services division by hiring experts in areas such as mechanical engineering and electrical estimating. Now more than ever, it’s imperative for program managers to find specialists who have a keen understanding of where to find cost savings and creative workarounds with subcontractors and designers so they can present competitive solutions for owners. 

Traditional preconstruction methods are typically limited to only the actual construction phase itself, but program managers can look at aspects that extend beyond final delivery so cost savings can be generated long after the project is completed. 

Under traditional preconstruction practices, it’s common for preliminary budget estimates to be off by 5%-10%. Implementing a more comprehensive preconstruction program typically results in cost savings of around 3%-5% and can even be as high as 7%-10% in some instances.

Technology Pricing

Another key factor contributing to the rise of third-party program managers is their ability to successfully obtain and leverage pricing technologies—soft technology, information technology and innovative products for operations—that can help create a more accurate and efficient budget for the long haul.

Third-party program managers have access to pricing approaches that incorporate data in categories that may not necessarily be top-of-mind for architects or general contractors. For example, new databases that provide historical pricing data on materials and labor rates for projects across the country are now emerging, and include insights on various stresses and pressure points that may be specific to individual markets. 

This technology allows program managers to create a realistic master budget that is less likely to be ambushed by cost overruns or time-consuming delays. An effective program manager can nimbly make manual adjustments as needed based on market knowledge, knowing that the data spit out by computers is often just a snapshot in time of market conditions that fluctuate on an almost daily basis in many locations.

Although still largely a novel concept, owners’ use of third-party program managers will continue to grow in the decade ahead as experts are needed in all of the different planning and construction disciplines. 

Those that rise to the top will be the firms that are actively engaged in leading a project, helping to create stronger partnerships and more business opportunities for general contractors that learn how to leverage the model for their own growth and success. 

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