Dynamic construction cost management to stay within budget. A recipe for success from Enderweit + Partner. Interview with Alexander Berg.
Mr. Berg, we keep hearing about construction projects whose costs are getting out of hand. What do you think are the causes?
There is rarely just one reason, but one of the main causes is that you realize far too late when you are running out of money. That used to be our problem too. We had cost statuses, invoices and Bill of Quantities somewhere, but it was difficult to derive daily updates from them: Where are we going right now? Where is a risk arising? Where do we need to react? Today, we work completely differently.
What have you changed?
On the one hand, we have simplified and partially automated our processes. On the other hand, with NOVA AVA and its cost analysis module, we have an excellent tool for active cost tracking and control. But good construction cost management starts much earlier for us.
When does good construction cost management begin for you?
It’s clear from the cost estimate. This is the basis of everything. We therefore create a very structured cost plan in NOVA AVA at the beginning. For many projects, we work with an internal trade catalog. In other words, we don’t just use the traditional DIN 276 or service areas, but a structure that our clients understand as well as possible.
We have stored the trades that occur most frequently in our projects and estimate the work based on quantities and square meters. This extends to the ancillary costs. This allows us to quickly and relatively easily create a reliable cost plan for buildings, building services, outdoor facilities and ancillary costs.
Another important aspect of construction cost management is the issue of “contingencies”. Construction in existing buildings is always fraught with risk. You simply don’t know a lot of things at the start of the project. That’s why we always include a separate item for contingencies.
So you deliberately work with risk buffers?
Yes, definitely. Otherwise you’re fooling yourself. Of course, everyone tries to plan as precisely as possible, but especially with renovations or conversions, there are always issues that only become apparent during execution. That’s why, for me, the issue of risk is an essential part of serious cost planning.
What happens after the cost estimate?
Once the client has approved this basis, we go to the Bill of Quantities and write them out – also using NOVA AVA. At some point, the construction phase begins – and this is where the cost analysis becomes important.
In the video – even more perspectives on construction cost management with NOVA AVA.
How do you use the cost analysis in NOVA AVA?
We work in such a way that we always actively store the approved cost estimate or cost calculation in the cost analysis. This is supplemented by contract award specifications, supplements, orders and risks. The target/actual comparison is then used to create the cost forecast. So the question is: Where do we actually stand today with the running costs?
How transparent is this process for you?
Very transparent. That was exactly what was important to us. In one of the last projects, for example, we were able to see that we are currently only 0.09 percent above the original cost estimate. You can live with that. The client is happy with that.
And at the same time, of course, I immediately see: Where do I still have a buffer? Where do I perhaps still have a residual item in “unforeseen items”? Where are costs going in the right direction and where are they not?
What is the decisive advantage compared to the past?
That we can now work live with the costs. We didn’t used to have that in the office. Today, invoices, performance statuses and construction site information are constantly fed into the cost analysis. When new invoices arrive or feedback is received from the construction site, this is incorporated directly. This allows me to evaluate costs on a daily basis and recognize them immediately: Where are we possibly getting out of hand? Where are there excess quantities? Where do additional costs arise? And above all: Where can we take countermeasures?
How do you respond specifically to cost overruns?
Take ETICS work, for example. There I can enter current figures in the target/actual comparison: Where are we on the construction site? Where do we have excess quantities? Which items are developing differently than expected? All this flows automatically into the NOVA AVA cost analysis. I can then immediately see where the costs for the external insulation are heading. If I recognize that certain items are becoming problematic, I can react at an early stage and inform the client. In my view, this is crucial for construction cost management: not reacting when the final invoice arrives, but as early as possible.
And what options do you have to counteract this?
In the best case, I save the costs elsewhere. The cost analysis module in NOVA AVA gives me an excellent overview of this. Because there I can see exactly: Which services – such as demolition work – have already been completed? Where are there still open risks? Which work is definitely no longer coming? I can already mark these items as finally invoiced – even if no final invoice has been formally issued yet. This automatically reduces the cost forecast and I can use budgets that become available with the client for other areas where costs have increased.
“Cost management used to be about keeping track. Today we are actively steering.”
Alexander Berg, Managing Director Enderweit + Partner
That sounds like a permanent economic control process.
Yes, that’s exactly what it is. In the past, cost management was often more about tracking. Today, we try to actively manage. We have become much more agile as a result. And if I want to, I can break the whole thing down to individual sub-items. This means that I can analyze in great detail where we stand.
How do you communicate this to the client?
Very open. We regularly provide our clients with an up-to-date cost status and also explicitly point out risks or dangers. The aim is to ensure that there are no nasty surprises at the end of the project. I think that’s exactly what clients expect today. They want transparency. They want to know: Where do we stand? What risks are there? Do we need to react or not?
Has this also changed the role of the architect?
Definitely. Architecture today is thought of much more economically than in the past. People often try to cut out the finishing touches in order to reduce costs. That’s a shame in part because it sometimes makes architecture more lifeless. But at the same time, cost-effectiveness is simply a key issue today. And that’s why we as planners have to become even better at implementing economical projects with quality. Our philosophy is therefore: even with very economically driven projects, we still try to get the best out of them so that the client and we can look at the project together and be satisfied at the end.
Thank you very much for the interview.
About the office
Since 1989 the Enderweit + Partner GmbH, Bielefeldhas been developing solutions for the development of land and real estate – holistically from the idea to realization. Its clients include public institutions, insurance companies, real estate funds, property developers and commercial and industrial companies from all over Germany. The managing directors are Dr. Ralf Enderweit and Alexander Berg.
