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How not to build a hotel: 3 common causes of cost overruns

Hotel projects are often subject to strict time and cost pressures – so how can contractors avoid problems?

Hotel projects are often under pressure to complete as early as possible, but in the rush to open, parties must take care to avoid three common causes of cost overruns.

Commencing projects with insufficient design information, not enabling sufficient co-ordination between disciplines, or authorising late changes to the client’s brief all place hotel projects at risk in terms of time and cost.

Each of these issues is considered below.

Undeveloped design information

The main cause of cost overruns concerns projects being tendered with incomplete design information.

This has two main consequences: firstly, design conservatism, with design consultants producing conservative tender documentation or with additional factors of safety embedded in the design.

Secondly, the risk from contractors, particularly those that offered the lowest price to win the job, who subsequently come under pressure to find other ways to recoup their losses, such as exploiting missing or incomplete information on tender documentation.

Insufficient co-ordination

Insufficient co-ordination between disciplines is another cause for cost and time overruns.

For example, incomplete mechanical, electrical or fire engineering designs might result in concrete coring penetrations through slabs or walls.

While some changes might be unavoidable as a building is opened up, allowing time for design co-ordination is vital to reduce long-term costs as well as the costs and time risk of finalising design work in the post-tender construction phase.

Late brief changes

On many hotel jobs, the parties involved in planning and designing the project change halfway through, with the operator then identifying changes to the owner’s original scheme.

Rapidly changing and competitive market conditions may also play their part, with unforeseen adjustments being required to the original client’s brief to satisfy changes in demand or to respond to concepts that may not work in practice.

However, the cost impact of changes to the client’s brief can be mitigated by encouraging any changes to be finalised prior to tendering.

The most successful hotel projects are those that have been well thought through, planned and investigated and that allow sufficient time for the design to be developed prior to tender.

Rushing a hotel project is inadvisable and invariably costs a client, whether in costs or construction time, more than it attempts to save.

Barry Hembling is a partner in the construction and engineering team at Fladgate

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