Why Owner Builders need to Manage their Schedule
I quite often get asked or more correctly told, by my owner builder course students that they are doing the majority of the works themselves so if they do not meet their estimated or established times for works as scheduled, it is no big deal!
Whilst I get their way of thinking, I often wonder if the owner builder has considered the cost of money.
Now if you are one of the fortunate owner builders who are self funding the project, then this will not have as great an impact however if like most of us you need to borrow to complete you project then time is a significant cost.
I will keep the figures very basic and easy to follow, and of course every owner builder project will be different and each of us will have different financial circumstances but you will get the idea.
Lets consider you are building a new home as an owner builder and you your estimate the project cost, including land value, legals, insurance etc, to be a neat $500,000.
With most banks only lending 60% to owner builders, it is likely you will may a loan in the order of $300,000.
Lets assume the owner builder has estimated the timeline to run for 12 months from first turning soil to practical completion and has factored in the finance costs over that period.
What is the cost of a 60 day overrun?
If we take an average 5% on an interest only loan (typical of a construction loan), and assume 90% has been drawn down awaiting final completion, then the owner builder is paying an amount of $1125.00 in interest each month.
60 days will mean an overrun of $2250.00 in interest alone, but of course there are other associated costs such as rent until you can gain occupancy, extended project insurances, temporary fencing, hire gear and such.
So even a two month delay is likely to have a negative impact approaching $10,000.00 and that is not taking into account the personal cost and stress that often is associated with building a new house.
The figures I have provided are very basic and we are in a current low interest rate period so the cost of money is very low. Imagine the impact where interest rates are 10 to 12 % and higher.
So if you think you can afford to let your project just amble along and do not keep a careful watch on your schedule and timelines, it can be a very expensive exercise.
Best Regards and Happy Building,
Scheduling for Owner Builders
Scheduling has two distinct and very different applications in the building industry, and our owner builder students have the opportunity to develop skills in both areas.
Firstly, scheduling as it relates to the development of a timeline, is a skill that is as much an art form as it is a science.
That said, owner builder students should recognise the importance of being able to determine a schedule and to drive or manage their projects effectively and with reference to a detailed schedule.
In our Introduction to Project Management course, we outline the basics of developing a realistic construct schedule for you owner builder project.
Using the blank proforma we provide, it is always recommended that you start by 'blanking out' the non work days such as weekends, public holidays etc. Doing this establishes a realistic and visual presentation of those days available to conduct work on your site. It also provides a small buffer to regain or reschedule lost time particularly in those areas where you might be conducting the works yourself.
Next step is to list each of the tasks you can identify as individually being required to complete the project.
Once this is done, think about the order or sequence that the works will need to be completed and the relationship between each task, trade or supply. This is known as determining the 'dependencies'.
Look for end - start dependencies and start - start dependencies, allocate the time assumptions for each task and develop your critical path (the longest time identified by the schedule using end - start dependencies).
Owner builders will need to seek outside advice in most cases to establish a realistic timeline, so don't be afraid to ask your trades or suppliers for their time estimates for their part of contracted works. Additionally seek to get as much information from them in respect to their availability and anything they can foresee that could potentially disrupt your schedule or delay access to the site for following contractors.
The second type of scheduling that is relevant to owner builder students is the production of lists (Schedules) of various building elements.
Most projects undertaken by an owner builder will require some schedules and may include a Prime Cost Schedule, a Window and Door Schedule, a Bracing Schedule etc. Almost all materials required can be broken down into a schedule, which is an efficient way in which the owner builder can identify, organise and manage aspects of their project.
A well written Specification, will always include a Schedule of Finishes. This identifies and documents the treatment of all finished surfaces and may include painting and staining, tile finishes, floor coverings etc.
Take the time to revise the course notes that discuss Scheduling and participate in the forums and chat groups to share information with you fellow owner builder students.
That is what this blog is designed to do. Together, we can make this a powerful tool for all owner builders.
Rick Heaton is a Building and Construction Industry professional with formal tertiary qualifications in management and training.