Guardrail #4: Permitting and Soft Costs

Triumph’s “permitting and soft costs” guardrail simply states that projects run smoother when builders and owners collaborate to research everything needed to secure permits.

That’s a bolder statement than it sounds because in construction, often the hardest part of providing an accurate cost estimate is predicting the cost required to get through the permitting process. Permitting is a challenge to predict because each site starts with a different level of preparedness and each locality has its own set of regulatory hurdles to overcome.

For these reasons, some builders distance themselves from the permitting process altogether. The conventional thinking is that owners (and their planners) get through the “entitlements” process (including permitting), and then involve the contractor at a later stage. This separates much of the land “enabling” process from the construction process.

With the conventional approach, the following are considered owner issues, and builders lock themselves out of the process:

  • pre-application conferences with zoning and planning boards
  • owner’s legal costs
  • civil engineering

That’s a mistake because working together, a builder and owner can avoid miscommunication and give themselves a much better chance of minimizing the time and expense needed for permitting.

But that still leaves open the question: How can we predict the cost of something as unpredictable as permitting?:

First, always start with an allowance for some unknowns.

Second, accept the fact that as builders, we must accept the bulk of the risk when it comes to these unknowns. After all, the owner has hired us because we are the building experts, not them, and we are being paid not just for the final product, but our expertise along the way.

Third, there is simply no substitute for experience. Having been through the permitting process countless times gives us a better chance of accurately predicting the costs, timeline, and risks of permitting, and naturally, builders who have developed land and built buildings in a particular municipality will have a good handle on the time and efforts involved when seeking permits there.

With respect to how different municipalities approach permitting in different ways, rather than fight against this, I accept it. Over the years, at the outset of projects I often hear people tell me, “Glenn, you don’t want to deal with the building inspector in that town, they are very tough …” And in every case, I think to myself “shouldn’t they be?” and “how much tougher could this town be from the last town?”

Complaining about inspectors and building regulations doesn’t add any value to clients. The fact is that building officials should be tough, and I have found every one of them to be fair, no matter how “tough” the perception. After all, they ensure that life safety and all other codes are followed. Rather than distance ourselves from this, shouldn’t we be embracing it?

To mitigate risks and delays, I recommend projects allow for a pre-construction period of research to unbundle the unknowns. Do owners want to pay for this? Often they don’t. Owners can be reluctant to pay a contractor to act as a consultant who analyzes the time and costs associated with land development and entitlements.

However, the truth is that the contractor is best suited to assess and mitigate the costs of such activities because they understand the whole project better than anyone else involved. Excluding that project knowledge from the permitting process can be an expensive mistake — often much more costly than simply paying for the consultation upfront.

In summary, projects are more successful when we — as builders, contractors, and architects — involve ourselves in the process of permitting and other soft costs. Permitting in particular is critical to getting a project in the ground, so let’s embrace it and collaborate with owners from the beginning to make their projects a success.

Continue to Cone 5 – Submittals | Introduction to Guardrailed Construction