In recent years, the need for transparency and accountability in terms of cost, construction schedule, and quality of construction projects in Japan has become a strong concern. As a result, the number of projects in which management companies and consulting firms specializing in construction management (CM) and project management (PM) work on behalf of clients from a standpoint completely independent of designers and constructors is rapidly increasing.
In this article, we will discuss the typical merits of hiring a management company or consulting firm for a construction project from the following perspectives, using the merits of using a construction management company as an example.
- Strong support as the right-hand man of the client
- Setting appropriate schedules and budgets
- Review of design to increase investment effectiveness
- Review and implementation of rational construction orders
- Improved efficiency through skills and know-how
- Ability to focus on necessary tasks
- Other advantages
1. Strong support as the right-hand man of the client
CM companies are independent of designers and constructors, and play a role in supporting the parties involved in the realization of a project. The basic position and essential roles of CM companies can be summarized as follows.
The basic position of CM companies is as follows
- Completely independent of the designer and contractor
- A member of the project team
The basic roles of CM companies
- The CM company’s essential role is to fill in the system that is lacking in the client.
- Support the team to realize the project
- Support the team in realizing the project
- Develop the overall vision of the project
- Identify issues to be addressed
- Develop strategies and measures to deal with issues
In general, the scope of CM in construction projects is broad, as described in “What is Construction Management (CM) in Japan?”
In this context, CM companies provide support to project teams by filling in the gaps in the client’s system as specialists who have the experience, specialized skills, and know-how required to implement the work. Therefore, the CM company becomes the right-hand man for the client and plays a very important role in the realization of the project.
Let’s take a look at some of the major advantages of hiring a CM company.
2. Setting appropriate schedules and budgets
First of all, by hiring a CM company, it is possible to set the target schedule and budget appropriately.
(1) Abundant project data
In general, CM companies have a lot of data on construction projects they have been involved in in the past. Therefore, for example, even if a project is in the conceptual stage, it is possible to set the required time frame for each stage of the project, such as planning and design, ordering and procurement, and construction, based on the schedules of similar projects. In the same way, budgets can be set based on actual construction costs for projects similar to the project in question.
(2) Understanding construction market trends
Since CM companies are constantly involved in a number of construction projects, they have a constant understanding of the construction market trends. Specifically, they have firsthand knowledge of the level of unit labor costs and material prices based on the actual contract performance of recent projects similar to the project in question, as well as the willingness to accept orders for new projects, internal policies, and the status of construction vacancies through daily contact with general contractors on projects.
(3) Appropriate target setting based on market trends
Therefore, when setting schedules and budgets based on similar projects in the past, these companies can reflect on market trends, for example, by setting schedules that take into account the busy schedules of construction companies and the extension of construction periods due to the impact of work style reforms, and setting budgets that take into account price increases and labor cost increases up to the time of order placement based on market conditions. This allows CM companies to set more appropriate targets.
This is made possible by the fact that CM companies are constantly involved in construction projects and have systematic data on the schedules and construction costs of past projects from the perspectives of region, use, scale, structure, building grade, and equipment capacity.
In this way, it is possible to set appropriate targets based on market trends using the abundant project data held by CM companies, which can be cited as an advantage for the client.
In addition, when CM companies set schedules and budgets, they logically develop qualitative and quantitative ideas and preconditions that reflect market trends in the actual results of similar projects, which are the basis of the schedules and budgets.
3. Review of design to increase investment effectiveness
Another advantage of hiring a CM company is that the CM company will review the plans and designs and consider alternative solutions.
Specifically, the CM company checks the content of the plans and designs to see if there are any unreasonable, unnecessary, insufficient, or excessive parts based on the requirements of the client, such as whether the specifications of the finishes are of a higher grade than necessary or whether the capacity of the equipment is appropriate for the scale of the facility required.
In addition to these checks, companies also look for alternatives to increase the value of the investment by having a significant impact on the cost and construction period by slightly revising the design, for example, through finding any cheaper materials with the same functions and performance.
These checks and examinations are carried out objectively from a viewpoint completely independent of the client or designer, but the effects of the alternatives are quantified in terms of the amount of cost reduction or the number of days the construction period is shortened, so that the proposal can be easily judged as to whether it is acceptable or not.
In this way, the content of the plan and design can be reviewed again from an objective viewpoint based on the requirements of the client, which leads to the consideration of increasing the investment effectiveness of the project, and this can be a great advantage for the client.
4. Review and implementation of rational construction orders
The next advantage of using the system is that it enables the rational consideration and implementation of construction orders. The ordering of construction works can be broadly classified into two processes: the review process and the implementation process, as shown below.
(1) Process of considering the ordering method
When placing an order for construction work, it is first necessary to examine which ordering method is best to use. On the other hand, as described in “Why is it Necessary to Use a Construction Management Consulting Firm in Japan?,” the construction market in recent years has seen an increase in the diversity and complexity of construction order methods.
CM companies have a good understanding of the characteristics and properties of each method because they have experienced the diversified ordering methods in actual projects through their constant involvement in construction projects.
Therefore, after organizing the purpose and situation of the project, the following questions can be addressed: What are the options and patterns of ordering methods? How different are the roles and involvement of the parties involved in each method, and to what extent do schedules and costs vary depending on the method selected?
This comparative study is very important because it is the basis for the decision-making process when selecting the best ordering method by the people involved in the project. As mentioned above, when this study is conducted in parallel from both qualitative and quantitative perspectives in the form of a concrete project, it leads to a rational study of the best ordering method.
(2) Process of implementing the construction order
Based on the order system selected through the above study, the actual construction order is placed. Since the required practical contents differ depending on the ordering method, the following is an introduction to the typical advantages of using the system in the construction ordering process.
Single point of contact with construction companies
First, a CM company can carry out the practical work required for ordering construction work on behalf of the client. For example, by using the CM company as a single point of contact for processes such as convening candidate contractors, holding briefing sessions, and question-and-answer sessions, which are necessary for bidding and quoting, the client can proceed without direct communication with the candidate contractors.
Formation of an environment in which the principle of competition functions
CM companies always strive to create an environment where the principle of competition can work among construction companies.
For this reason, CM companies are always looking for ways to increase the willingness of construction companies to accept orders and how to create an environment where the principle of competition can work strongly. In particular, in recent years, there has been an increase in the number of general contractors in the market.
In particular, in recent years, there have been many headaches for clients, such as general contractors refused to provide competitive quotes or general contractors were not willing to participate in bidding.
Scrutiny of quotations and price negotiations based on market conditions
In this construction order process, there are advantages to using a CM company for the close examination of quotations submitted by construction companies and for negotiating prices and contract terms.
As mentioned above, CM companies are constantly involved in construction projects. Therefore, when a quotation is submitted by a construction company, the CM company has an understanding of the level of labor and material prices that have been transacted in similar projects in the recent past. In other words, the contents of the quote can be examined based on market conditions.
In addition, price negotiations with construction companies are usually based on the results of a close examination of the quote. In this case, the CM company will organize the conditions and assumptions that are the premise of the scrutiny before proceeding with the negotiation, and thus will be able to present the basis of the scrutiny to the construction company in a convincing manner.
In this way, CM companies can not only check the validity of the quote based on market conditions, but also organize the results in a persuasive manner, and negotiate the price with the construction company face to face.
Especially in recent years, construction companies have been in a seller’s market where they have an advantage over the client, so it is difficult for them to accept price negotiations without evidence or persuasive power. However, if a construction company can understand the rationale behind the scrutiny, it can be expected to respond positively to price negotiations.
5. Improved efficiency through skills and know-how
We have already mentioned the specialized skills and know-how possessed by CM companies, and one of the advantages of using them is that projects can be carried out more efficiently. The following are some examples of skills and know-how possessed by CM companies in addition to those mentioned above.
The following are some examples of specialized skills and know-how possessed by CM companies.
- Various management skills
- Ability to organize and explain
- Identifying the essence of problems and issues
- Ability to organize and explain issues in an easy to understand manner
- Ability to deal with problems when they arise
- Have similar experience in the past
- Implement measures based on experience
- Have tools, templates and forms
- Schedule, information & cost management tools
- Quote, contracts, change management forms
The above are just a few examples, but the tools and formats, as well as the specialized skills, are the result of years of experience and practice by CM companies. Therefore, making the best use of them will lead to a dramatic increase in the efficiency of project implementation.
6. Ability to focus on necessary tasks
Here, we would like to mention the merits of using a CM company from a slightly different perspective. That is, when requesting work from a CM company, it is possible to select the necessary work and then request it in a rational manner.
This is because the fundamental purpose of hiring a CM company is to supplement the experience and skills that are lacking in the client’s system in order to perform the CM work required for construction projects.
Therefore, it is not necessarily necessary to request all CM work, but rather to request work from the planning and design stages until the selection of a construction company, or to request only cost management work because of a lack of cost-related skills, based on the purpose and situation of the project. For example, you can request work from the planning and design stages until a construction company is selected, or you can request only cost management work because you lack cost-related skills.
7. Other benefits
Finally, in addition to the advantages of using a CM company mentioned above, other advantages are briefly introduced as follows.
Other advantages
- Review of designers and contractors with whom you have a close relationship
- Quickly identify trends in the construction market⇨ Support reporting of market trends
As mentioned above, in this article, we introduced some of the typical advantages of employing management and consulting companies in Japan, using the advantages of using construction management companies as an example.
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