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Originally published in Interiors & Sources

01/28/2003

Industry Trends and Building Owners

 

According to the just-released 2002-2003 U.S. Markets Construction Overview, published by FMI, a Raleigh, NC-headquartered provider of management consulting, training, and capital services to the worldwide construction industry, the events of Sept. 11, 2001, and the recession changed building owners’ ability to perform as well as their capital and facilities needs. Understanding current abilities and performance gaps and putting in place new strategies and tactics for buying and controlling design and construction services is essential to these owners’ future success. The focus will lie squarely on improving return on investment.

Owners, be they large private corporations or government entities, are facing similar challenges in the effort to effectively deliver capital and facilities maintenance programs. Real estate, design and construction, and facilities maintenance business units are being asked by management to execute more projects and manage more capital/facilities dollars with fewer internal resources – to increase the quality and value received for each dollar, while cutting costs and schedules.

In the case of private industry, time-to-market is a major competitive edge, and construction is often viewed as the necessary evil to get there. These departments are being asked to better anticipate the facility needs of the organization and to build more flexibility into the facilities they construct. Flexibility is important in an age in which organizations are changing direction more swiftly, or in the case of retail, dealing with a public that requires a new look more frequently.

Among the challenges that are driving owners toward solutions that increase their reliance upon outside suppliers are: meeting budgets, meeting schedules, overcoming labor shortages, finding the right construction managers/general contractors, finding the right architects/engineers, achieving a quality end product, and satisfying end-users. As a result, FMI notes the following owner trends:

  • Strategic Assessment – what owners are doing to assess their current performance level, an important step on the road to improvement. FMI notes, “Owners must understand what they do well, what they don’t, and how they compare to other organizations in order to focus upon the right strategies moving forward and to incorporate industry best practices.”
  • Strategic Sourcing – what owners are doing to more cost-effectively buy design and construction services. Of particular note, according to FMI, “The question of risk has become much more complicated over the past 12 months. The tightening of the insurance and surety industry will not only impact service providers; it will impact owners as well. Owners will pay the price for the higher cost of insurance, driven by huge insurance industry losses and an increasing contractor bankruptcy rate that is reducing the amount of surety credit available to average contractors. The end result is that fewer suppliers will have the bonding capacity to work on owners’ projects, driving up project costs for owners.”
  • Strategic Program Control – how owners more effectively control their capital and facilities maintenance programs to achieve the desired end results. FMI further notes: “The ability to anticipate and control change is a major competitive advantage to most owners that possess it. Owners are analyzing what they can do to cut down on unanticipated change. They are asking what their service suppliers can do to cut the cost of change in the delivery process. Improvements in this area require an initial analysis of the historical cost and drivers of change. Only through gathering and understanding this information can an owner effectively reduce the cost of future change.”

Interested in learning more? For more information, visit (www.fminet.com) or call (800) 877-1364 to order a copy. (Reprinted with permission from FMI’s 2002-2003 U.S. Markets Construction Overview, FMI Corporation, [919] 787-8400.)

 

 
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