A desperate call for rescue
Many developers reach a desperate situation when they decide not to contract the services of a professional Project Management company. This unwise decision affects all aspects of the project, with negative consequences for the developer himself and for the final owner of the property.
We rescued a project after the developer's funding was exhausted due to an incomplete initial bid for funding that did not take account of all construction costs. He was developing a project and it was 6 months late in delivery and counting, but was only 70% complete, and his 9m€ loan had run out. The situation was desperate. Every day his position was worsening, he was haemorrhaging cash and credibility. The constructor wanted a further €5m to complete the works – only 70% was done. He could not generate any cash flow because he had sold the units to receive 70% of the purchase price on completion.
Identify the major problems
MDCI's challenge was to determine where we were, where we needed to go and how to get there. First we had to identify the major problems. There was a lack of strategy in every single department which resulted in the project being extensively late, substantially over budget and suffered from woeful quality issues. So Over Cost, Over Time and Under Quality.
There were errors of interpretation of the term quality between the owner and architect and the owner and the clients. The brochure spoke of materials that were not being implemented. We intervened and clarified the process. The constructor was “value engineering” the architect and owners by proposing cheaper quality materials at the same price but under the pretext of being able to develop faster. The Client offered changes in qualities direct to the clients without charging and without understanding the consequences to the development timetable in time and cost.
Intervention and repair
MDCI intervened and repaired the construction contract, the bidding documents and the project documentation. We were able to go back to the bank with new cash-flow projection. Instead of delivering the 100 units at once, we would phase the delivery, delivering eight blocks in staggered fashion, which enabled the client to obtain completion funds from sales and allow the next phase to proceed.
The end result was an impressive projects that although was late and over budget, enable our client to survive.
So successful were our management efforts that the developer compensated his customers by installing good quality German kitchens in the units. This was paid for by the sharp reduction in landscaping cost we achieved by bidding out those works.
He also made a PROFIT. Some of the clients pulled out and this gave him an opportunity to re-sell at a much higher price as we advised.
If the developer would have had a project management provider from the beginning, he would have had:
- An ally in place at all times
- Awareness of local laws and practices
- A full understanding of the objectives
- Budget awareness and protection
- Developing timings
- A new and added dimension to his team