In our London City office alone, we are increasingly seeing landlord and perceived market-driven requirements for Value Engineering to industrial, retail and office refurbishment projects where we are appointed as Contract Administrator.
Typically, these ‘nice to have’ items are being omitted from contracts due to cost, leaving the scope to include items of work absolutely necessary within a Value Engineered contract sum.
Those remaining items are often then subject to further scrutiny with consultants tasked at either refining scope or proposing lower cost alternatives. Those ‘nice to have’ items having originally been included within tender documents on the advice of letting agents at feasibility stage, in some cases months previously when the market was in a very different place.
From our recent experience, these projects progress and letting agents update landlords on market conditions and whilst these omissions may be flagged on project risk registers, more often than not Contract Instructions are then issued to include those original ‘nice to have’ items, only not necessarily at previously tendered rates (this was particularly notable post-Brexit during COVID-19 with the associated problems of material availability and import delays).
With pricing risks previously with contractors now being with the employer, they are left with little choice but to implement various changes at comparatively increased cost, potentially also exposed to Extension of Time costs, making including those ‘nice to have’ items incredibly expensive.
In some cases we are instructing ‘day 2’ work to further enhance completed refurbishments following either further agent advice, comments from prospective tenants or competition in the vicinity. With it being a tenant’s market, landlords have little choice but to improve their product.
The question remains if Value Engineering ultimately increased total refurbishment costs to these schemes, would landlords have ultimately benefitted by not being so cost driven at pre-contract stages?
We realise that every project, budget and brief is very different and Value Engineering in some form is an inevitable part of almost every project. But with open and frank engagement between landlords and letting agents at the feasibility stage to allow the development of sensible design briefs for consultants to follow allows contractors to deliver a high-quality, market-ready product with minimal mid-contract enhancements.
If you are interested in the balance between cost and quality, contact Josh Pearce on 07713 476653 or firstname.lastname@example.org.