Owners Take Note: Your Design Professional Can Help Improve Your Bottom Line | Practical Law

Owners Take Note: Your Design Professional Can Help Improve Your Bottom Line | Practical Law

Owners and developers of large construction projects can improve their project's financial health by investing early in the right design professional. This Update provides guidance for owners on how to control costs and increase profits by hiring an experienced design professional early in the process.

Owners Take Note: Your Design Professional Can Help Improve Your Bottom Line

Practical Law Legal Update w-000-7285 (Approx. 5 pages)

Owners Take Note: Your Design Professional Can Help Improve Your Bottom Line

by Practical Law Real Estate
Published on 03 Nov 2015USA (National/Federal)
Owners and developers of large construction projects can improve their project's financial health by investing early in the right design professional. This Update provides guidance for owners on how to control costs and increase profits by hiring an experienced design professional early in the process.
Design professionals often complain that owners and developers do not enable them to do their job. One of the most common complaints is that the owner does not want to compensate them for the time required to fully and thoughtfully investigate the project requirements before undertaking the project's design.

Owner’s Program

It is a worthwhile investment for an owner to retain one or more design professionals to assist with the process of developing a program for a construction project. The program formalizes the owner's objectives for the project and helps to guide the project's design. An experienced architect knows the project-specific inquiries to bring life to an owner’s vision.
Proper planning streamlines the design process by identifying and addressing issues such as:
Investing the time and money at the outset of the project to identify and address key issues that may later impact the project will help maximize profits down the line.

Market Knowledge

In the program phase, the architect studies the community in which the project is located to determine how to incorporate design elements that enable the owner to obtain the highest possible market price. A knowledgeable architect will consider such factors as:
  • Design trends, such as demand for luxury amenities to distinguish high end condominium residences.
  • Sustainability elements that are consistent with corporate cultures.
  • Market desirability for certain types of hospitality or retail tenants.
In performing a comprehensive market analysis, the architect also analyzes the statutory and regulatory requirements in the project location to determine whether there are any tax benefits or other incentives for such things as:
  • Sustainable building elements.
  • Low income housing.
  • Certain types of retail, such as grocery stores in under-served communities (see Article, Trends in Net Leasing).
For more information on sustainable building elements, see Practice Note, Owning and Leasing Green Real Estate.
Sensitivity to market and design trends helps to ensure that a project is in the best position to get ahead of the competition.

Value Engineering

Early value engineering, before the design-review process is completed, is critical to keeping a project on time and on budget. First performing value engineering after completion of the design-review process can be both time consuming and costly for the owner because:
  • The originally approved design must then go through a second design-review process, which takes time and results in fees for additional design services.
  • Value engineering changes can impact other elements that are not discovered until after the project is bid. This may result in costs and delays associated with change orders during construction.
An informed architect also has an understanding of different material and design options and can present the owner with choices that:
  • Provide design impact.
  • Are sustainable, if desired.
  • Can be cost-effective alternatives.
An experienced architect is aware of the market availability of different materials, which can help prevent delays and unanticipated additional costs as the project progresses. For a recent example, see Legal Update, Glass Shortage Leaves Construction Industry on Thin Ice.

Practical Implications

To maximize a project's bottom line, owners can benefit from earmarking more of their soft cost budget to retaining and adequately compensating a design team to perform the required feasibility studies and investigations early in the planning process. Defining the scope of work and expectations for the design professional's role can ensure a thoughtful process. Working from the outset with a design professional who is both creative and knowledgeable will go a long way to ensuring a project’s success.
For further guidance on negotiating an owner-architect agreement, see Owner-Architect Agreement for Design-Bid-Build: Owner's Drafting Checklist.
For more information on the typical design phases of a construction project, see Practice Note, Private Construction Project Delivery Systems: Overview, Box: Customary Design Phases.