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Right-sizing Projects in Today’s Volatile Construction Market

By Michael C. Scott, AIA, TSKP STUDIO

There are two Towns only 9 minutes apart in the surprisingly large state of Pennsylvania, the Town of Desire and the Town of Panic. As architects, we find ourselves on the road driving between desire and panic, trying to find the right balance for projects. Establishing the goals of a project early and building consensus around those goals can build a solid road map to follow as plans unfold and detours occur.

Public clients grow and build differently than commercial clients. Public capital projects are built less frequently and must last longer. While budgets guide all projects, public projects are often constrained to the initial budget number, often by public money appropriated by referendum. This creates an early public expectation of scope, quality, and cost, which must be met. Typically, public projects have a champion or a group of visionaries who drive the initial steps and have a multitude of stakeholders. For a community to truly become invested in the project, these stakeholders need to be included early in the process when the project goals are established. Ultimately, it is the end user who will determine the success of the project.

Once a project’s goals are established, and existing conditions have been studied, the beginning of a concept starts to take shape. During the design process, projects are introduced and tested against the real world in which they must perform. Any educator, leader, or parent recognizes this as the adolescence stage. Projects, like most people, grow awkwardly. They present flashes of what they can become but often reside as partially realized until another sudden moment of growth. Projects have always developed in this manner, but what happens when projects must do so in the current market environment?

Unprecedented changes and struggles defined the last two years. Construction markets thrive on stability. Since early 2020, we have seen nothing but volatility as the market has swung between extremes. The initial pandemic uncertainty forced immediate and dramatic deflation as bidders attempted to hold production and maintain market share. Our region saw bids as much as 20% below 2019 budgets. However, as the uncertainty of the pandemic persisted, the market became dominated by scarcity. Shortages of labor and materials pressured commodity markets and production. Shipping and delivery issues started to become commonplace. As the market recognized these new realities, inflation and interest rates rose. In our region, we see escalation well above 10%.

If the construction market thrives on stability, how can projects be successful when the market unexpectedly swings by as much as 30%? These are challenging times for clients and their developing projects. Experience as architects, educators, and leaders, teaches us three key points.

  1. BE CLEAR. Guiding the development of public projects relies on consistently reinforcing the project’s goals. These goals must be clear and the standards set early. Moreover, there must be consensus on those goals. A project with a clear vision is more likely to succeed in a volatile market. When obstacles arise, turn to the project goals to guide decisions. This can safeguard the project from adding unnecessary frills, blowing the budget, or (worse) taking away necessities to meet the budget. Projects must meet their goals to be successful.

  1. BE OPEN. Multiple solutions achieve the necessary criteria. Build first what must be in place, knowing it will stand for decades. Consider building with materials that are timeless and durable. Then build what is needed only for now, not for all time. Consider multiple uses of the same space. Build less space. Public projects come to life when occupied by their end-users. Smaller, more durable projects are more lively and adaptable. Exposing a project to today’s market pressures burns off the unnecessary to reveal the essential. Testing the desired project goals against what is needed minimizes future budget and program panic.

  1. BE NIMBLE. Now that the essential project criteria are defined, and goals have been achieved, it’s time to meet with the stakeholders to discuss the next set of standards. Offer flexibility, serve more end-users, last longer, and operate more efficiently, for example. As designers, we build these criteria into the drawings at every phase called Add Alternates. An Add Alternate is a list of “nice to haves” which are priced at every milestone. Ultimately, the project is bid with these alternates allowing the market to weigh in on their value. We have found that even in this volatile market, competition for the overall project affords aggressive pricing and good value on alternates. These alternates also have an advantage well in advance of bid day. At each phase, the list of alternates is priced and evaluated by the project team. Together, we can track the “cost” of features, programs, or systems the stakeholder values. This affords the project “rank-choice” prioritization. Some alternates might be folded into the core project. Some may fade away. Alternates create an open and transparent forum for what the project could and must include. Alternates save time. This allows a project to proceed onto the next phase and ultimately into bidding. However, alternates are not a list of needs. The core project must meet the overall goal without any of these alternates.

Not long ago, we built things to be sustainable. Now we build to be resilient – resiliency in our institutions, our programs, and our communities. Projects, too, must be resilient. Buildings, in their final form, should be adaptable. For the foreseeable future, bringing such facilities into being must adapt to these market forces. Such an effort requires passionate foresight of all a project must become and patient insight into how it must get there.

About the Author

Michael C. Scott

Michael C. Scott has contributed to a wide range of project types and scales, from working with Steve Jobs on the corporate campus for Pixar in Northern California to a middle school in Middletown, Connecticut. He enjoys creating a complete environment that fosters a sense of community and leaves the community with a feeling that their voices were heard.  Michael is a registered architect and a senior associate in the Hartford-based TSKP STUDIO with 25 years of experience. He can be found exploring a trail in one of Connecticut’s many land trusts or at his local library, browsing books related to local history or humor (sometimes the same book).

About TSKP

TSKP Studio

Founded in 1970, TSKP STUDIO is a diverse architectural practice that continues the legacy of our founder, Tai Soo Kim, who grew the firm to international recognition through a dedication to hard-work, exploration and commitment to logical and elegant design. Our work responds to the unique context of each site and client with educators often remarking how well the classrooms and spaces work for their students and them. By embracing the diversity and talents of our staff we leverage a broad range of skills and experiences to provide fresh solutions to complex challenges. Regardless of project scope, size or budget, our definition of success is creating spaces that positively impact the life, productivity and wellbeing of our clients and end-users.

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