Bringing Down Costs in Residential Projects Through Project Management

Disciplined project management starts at the portfolio level, where the strategic vision drives initial investments and where value measures are established.

17 May 2018

By Gurjot Bhatia

Bringing Down Costs in Residential Projects Through Project Management

Indian real estate has been in a dynamic transformation mode for last 10-15 years. This, along with increase in population and urban sprawl has led to high demand for housing. To cater to this demand, investors and developers across India have focused their attention to construct large scale residential developments.

High demand for housing and high cost of land has led to developers opting for the most sustainable option of high rise multi story construction over the last several years. Due to this influx of residential supply in a relatively short period of the last few years, developers have had to face the challenge of manage the triple constraint of time, cost and quality. For the residential sector, cost of construction becomes the utmost priority as this is directly proportional to the type of the product (affordable, mid-range, luxury etc.). Also, the timeliness of delivery has a direct impact on the cost and the reputation of the developer. Looking to have a competitive edge, developers are turning to Project Management as an avenue to consistently deliver residential projects within timelines and projected cost.

Disciplined project management starts at the portfolio level, where the strategic vision drives initial investments and where value measures are established. A fully aligned project, program and portfolio management strategy encompasses the entire development, dictating project execution at every level and aiming to deliver value at each step along the way. Project Management in fact becomes shorthand for project, program and portfolio management. At an enterprise/execution level, application of robust Project Management optimizes the project cost in number of ways:

  • Design Management – value & performance enhancement via value engineering. Cost reduction via material and technology substitutions.
  • Identifying risks – Critical areas, time consuming activities, labor intensive jobs, resource dependent actions, there-by ensuring cost distribution of low and high-risk activities.
  • Detailed Program Management – Using tracking tools and software, keeping margins and back up planning for the identified risks, thereby allocating a sundry cost for the back-up in case of high risk actions.
  • Human Resource Management – understanding the potential of each team member, allocating tasks and timelines in a customized fashion, thereby optimizing on the overall cost of man-hours required.
  • Cost Management – drafting a high-level budget at conceptual stage. Aligning it with the resources/funds available. Transitioning this figure into a more detailed budget at the program management level and further breaking it down to the last nail before tendering stage to avoid any surprise costs during construction.
  • Procurement Management – Of course cost negotiations is the key scope here. But it is even more important to manage the timeline and quantity of materials to avoid either damage for being unused for a long time or cost of storage. On other hand to avoid cost of unused labor in course of delayed deliveries.
  • Regular audits – this includes design audits, quality audits, cost audits and process audits. Possibility of a cost overrun (or even time and scope) can be identified and dealt with at a very early stage, rather than waiting for it to balloon.
  • Ethics and compliance - Ensuring adherence to ethical practices and processes in vendor selection, consultant selection, material procurement, etc. – leads to a robust working system devoid of chances of incapability or under performance, thereby saving cost on rework / revision / replacement.
  • Health and safety standards – Adherence and conscious observance of health and safety measures, avoids any health hazards / accidents – which in a long term, saves cost on delays and least to mention, damage to the brand’s value.

While the right approach and ensuring the adherence to standard operation process optimizes the cost and neutralizes the possibility of an over-run, strong Project Management also engages in some creative ways to reduce the cost.

  • Moderating “over-skilling” - Sometimes project teams have the tendency to engage in “gold plating” and adopt the mindset that doing more is safer than doing less. This thinking may be related to how project teams respond to risks. When project teams are risk-averse, they may overcompensate by performing quality testing more than they should or by “over-communicating.” Moderating this phenomenon and strengthening the knowledge base to overcome the lack of confidence can help reduce the unnecessary costs.
  • Opting for Must-Have’s Versus Nice-to-Have’s - Similar to the above, project teams should look at the project plan deliverables to look for opportunities to identify “must-have’s” versus “nice-to-have’s” to reduce costs without compromising the scope, schedule, quality, and in-habitant satisfaction.
  • Look for Peaks and valleys in resources and materials – whether we talk of funds, team members, SMEs or materials – there is a peak requirement across various stages of the project and a valley phase. To mindfully designate the resources and materials during these peaks and valleys saves cost of utilization.

Companies which can effectively reduce costs while keeping the quality of the project intact and delivering on time shall have an edge over the others. This is even more so for a residential building, where the consumer buys for self-consumption. Optimization cost, while maintaining quality and timeliness of the Project has a direct, positive influence on sales, and Project Management plays an important role in achieving this.