How to Manage the Hidden Costs of Upgrading Old Buildings
ADVISORY ARTICLE
By Nitin Gulati, MS, PMP
New York, USA
To remain operational, periodically buildings need to be upgraded. Changes to laws and building codes require renovations to remain in compliance. Structures deteriorate, fire alarm systems become outdated and ventilation units become inefficient. As technology progresses, sprinkler systems are upgraded, and once commonly used materials, like lead and asbestos, are found to be environmental hazards. While there are a variety of reasons to update an aging facility, these and other renovations come with unique challenges.
Upgrades can be divided into two camps: optional and mandatory. Optional upgrades improve the building’s function or aesthetics but are not required by any legal authority. Such improvements may include expanding a lobby or installing air conditioning.
Mandatory upgrades, on the other hand, carry a penalty for noncompliance. These changes are required by building codes or local regulations. For example, when New York City passed Local Law 26, it sparked a rush of retrofitting as businesses scrambled to comply. The law, passed in 2004, established retroactive safety requirements, including requiring business buildings 100 feet or taller to be fully protected by a sprinkler system. The city’s property owners had to install sprinklers in hundreds of buildings. The original plans for many of these buildings were long lost, leaving architects to guess what may be behind the walls.
Lay of the land
Missing or incomplete plans throw an extra wrench into the already complicated process of bidding on facility renovations. Contractors base their bids on original plans, feedback from facility managers and a site walk-through. Some problems, like lead or asbestos, are hidden, uncovered only once construction is under way. That puts contractors in a difficult position: they can’t bid what they can’t see.
Here’s another example. If a wall is opened as part of an optional upgrade and asbestos is discovered, the contractor can’t just ignore it and carry on with the original project. Asbestos remediation is mandatory. Once the problem is known to exist, legally, it must be addressed. What starts as an optional improvement may lead to a chain of mandatory upgrades.
Both the owner and contractor need to be prepared for such surprise situations and leave room for them in the budget. Contracts can be structured to allow contractors to submit invoices for actual costs plus a fee, usually up to a predetermined cap. These contracts can protect the owner from budget-blowing expenses and assure the contractor he or she will get paid.
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How to cite this article: Gulati, N. (2020). Expect the Unexpected: How to Manage the Hidden Costs of Upgrading Old Buildings, PM World Journal, Vol. IX, Issue IV, April. Available online at https://pmworldlibrary.net/wp-content/uploads/2020/04/pmwj92-Apr2020-Gulati-expect-the-unexpected-advisory.pdf
About the Author
Nitin Gulati
New York, USA
Nitin Gulati, PMP holds a master’s degree in construction engineering and project management from the University of Texas at Austin and a Master of Science in structural engineering from Michigan State University. He holds a project management professional (PMP) certification from the Project Management Institute (PMI). He has over 15 years of work experience in the design and construction industry and is currently working as a lead construction project manager. For more information, contact: littlengine@utexas.edu or call 517.944.4623.
