Construction Project Development – Understanding How Construction Projects Grow from Brief to Open Doors – Part 1

Every construction project will undergo a series of iterative stages. In this set of articles, we break up what each interlinked phase is and why they are so important to the successful completion of a construction project.

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October 6, 2024

Construction Project Development – Understanding How Construction Projects Grow from Brief to Open Doors – Part 1

Every construction project progresses through a series of iterative stages. In this article series, we break down each interconnected phase and explore why they are crucial to the successful completion of a project.

What Are the Stages of a Construction Project?

Many architectural institutes and councils across the world subscribe to a staged approach for construction projects. Generally, they vary between six and seven stages. In South Africa we subscribe to a six-stage process, although the use of the RIBA Seven Stage Plan of Work is also common.

Each stage comprises clear service deliverables and the architect should clearly explain to their client what each deliverable is, its importance to the overall project and how the architect intends providing the service.

The South African Council for the Architectural Profession defines each stage as:

  • Stage 1: Project Inception and Brief Development
  • Stage 2: Concept Design
  • Stage 3: Design Development
  • Stage 4.1: Local Authority Drawings and Documentation
  • Stage 4.2: Tender Drawings
  • Stage 5: Construction
  • Stage 6: Handover and Close-out

There is one other preliminary stage which is often not formally recognised, yet it is crucial to a large-scale project’s success. This process entails obtaining financial close.

  1. Achieving financial close is a process-driven approach to secure the necessary funding for a construction project.
  2. Raising funding for a construction project involves two main components: Debt finance and equity investment.
  3. Equity investment can take many forms and it can be the hinge upon which reaching financial close rests.

In this article we’ll concentrate on Achieving Financial Close: Stage 0, and where a specialist architect firm like Graceland Architects assists its clients in securing the funds to begin a large-scale construction project.

Stage 0 combines the market analysis, feasibility study, initial broad concept, town planning approvals and indicative costs along with other permits and licenses.

The main deliverable of Stage 0 is a business case document that debt funders and equity investors may interrogate and confirm their support, or rejection, of the project offering.

Stage 0: Project Feasibility and Business Case Development

We’re often approached by consortia seeking to develop big, expensive healthcare projects. In many instances they are clinician-led who lack experience in the development of capital intensive construction projects.

In addition, there is little knowledge of the processes and the associated seed costs required to get to a point where the project raises the necessary funding to proceed to full design and construction.

How do we begin the process of reaching financial Close?

We have prepared a comprehensive questionnaire that assists clients in understanding where they are in the process of preparing a solid business case.

Some of the questions we ask include:

  1. Has the parcel of land been secured and is it fully serviced?
  2. Is the project greenfield or brownfield?
  3. Has a market study been conducted?
  4. In the case of a hospital project in South Africa: has a bed license application been concluded and is the license approved?

Contact us to go through the full questionnaire and let’s help you reach financial close.

Once we have established which processes the client has undertaken, which ones have been completed and which are in process, a development framework is put in place with some indicative timelines.

Selecting the Right Consultant Team

It is very important to select the right consultant team when embarking on any construction development.

Healthcare facilities, in particular, require specialist professional design skills that differ considerably from other development typologies like residential, retail or commercial projects.

Investing in an experienced professional team allows for a smoother, leaner approach that is more likely to succeed than working with a disparate group of consultants who have limited experience working on specialised development typologies.

Over many years, Graceland Architects has fostered and developed lasting relationships with other like-minded and experienced quantity surveyors, engineers and health planners – a comprehensive team dedicated to achieving our clients’ project success.

These relationships are very important when preparing a successful business case: We know what initial information our Engineers, QSs and Health planners are looking for.

Our QS’s know what design data to ask for and what empirical, historical data can be applied in preparing accurate estimates.

The engineers, for example, know what medical equipment is required and how to reticulate medical services in the most efficient way.

The health planner, a critical team member, is able to review concept designs and market analyses to develop a detailed financial model.

Together, our team provides a comprehensive service that creates a tangible product ready for presentation to potential investors and financiers.

Large projects, where design and construction extend across several years are capital intensive and complicated. A misleading phenomenon in the built environment sector exists where professionals are expected to undertake large portions of the design work for free up to financial close and the project proceeds to construction. Often referred to as ‘working at risk’ it creates direct and indirect risk for both the developer and the consultant:

  • The consultant experiences the direct risk of doing work for free with the possibility of the project not proceeding and then receiving no payment.
  • The developer, seeking to extract work for free indirectly creates their own risk because consultant firms downwardly resource the project to limit overhead exposure.

While ‘risk work’, in itself, is not illegal it should be frowned upon. There are other ways where both parties can mitigate their risks without having to spend large amounts of money which could potentially derail the project.

The Market Analysis

Different clients will have different development goals: some may wish to develop commercial offices while others might seek to create a hospital complex.

In most instances clients already have access to land and they have an idea of the type of project they want to undertake.

A market analysis should be carried out to confirm that the client’s development endeavours are indeed viable in the chosen geographic location.

Conversely, a client may have identified a market need and is now seeking to find property on which to develop.

The market analysis, which could take the form of a desktop study, an in-loco research project or a combination of both will identify the extent to which the potential development needs to be explored.

With a hospital project, a market analysis would identify the bed demand, the available clinicians and other auxiliary staff, current tariffs and the geographical catchment area among other metrics that could have a bearing on the design and financial feasibility of the project.

Part 2 – Feasibility study through to business case packaging

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