The Benefits Of An Open Book Approach
An advantage of managing construction projects open book and at cost is the unparalleled level of transparency it provides to investors, writes Anthony Corin.
31 July 2023
Streamlining the project management process to simplify and de-risk the process for all involved is the ideal outcome for any developer in the construction space.
To optimise the construction timeline and to ensure the process is transparent and using good-faith practices, industry professionals are turning to a progressive approach of open book, at cost and no added margins project management. This system offers several benefits to streamline the project, providing investors with greater control, cost transparency, and improved outcomes.
While closed book project management does not allow for influence from others, open book invites interaction and encourages feedback to improve operations.
An advantage of managing construction projects open book and at cost is the unparalleled level of transparency it provides to the investor. Under this system, all financial records, including costs, invoices and receipts are open to investors, encouraging their participation and feedback.
Traditionally, this level of data transparency would be kept confidential, but this transparency fosters trust and ensures investors have full visibility into project expenses, mitigating risk of hidden costs or financial discrepancies. This system also allows for early identification of potential problem areas of the project, enabling prompt problem solving before it becomes a critical error that could affect profitability.
Operating open book and at cost with no margins gives investors a greater level of construction control, and a higher level of confidence over fund usage. By having direct access to cost information and collaborating with project managers, investors can actively participate in decision making, selecting cost-effective options and making adjustments. This collaborative approach with project managers aligns outcomes to meet their vision, keeping the project costs within their initial expectations and budget.
Under traditional project management processes, New Zealand construction costs often include an average 10 per cent margin for unforeseen expenses. However, this practice can lead to inflated budgets and unnecessary expense. Managing the project open book, at cost, and without the inclusion of margins offers a more accurate representation of the actual costs involved.
A detailed breakdown allows investors to see the direct costs incurred for each aspect of the project. This level of accuracy can be time consuming to compile, but it shows the true cost of construction, promotes cost efficiency, builds trust between all parties involved, and eliminates unnecessary spending.
Open book project management fosters a collaborative environment among all project stakeholders. Working together with the project management team, the investor is able to actively engage in the selection process, gain valuable industry insight, select cost-effective alternatives, collectively make decisions on resource allocation, and understand the quality and costs associated with materials.
With accurate data provided to the investor they can influence the project’s direction and ultimately improve profitability. This collaborative approach leads to increased efficiency, promotes open communication and cooperation to achieve common goals, and facilitates a smoother progression of the project where everyone is on the same page.
Open book, no margins, and at cost project management offers significant benefits for property investors in NZ, streamlining construction projects and improving overall outcomes. With enhanced transparency, investors can gain control over project finances and get the chance to actively participate in decisions.
By embracing this innovative approach and placing value on good-faith procedures, investors can enjoy more security in their business venture under a safer business practice that maximises cost-efficiency and profitability.
Anthony Corin and his team specialise in property development and construction using ICFs and operating through a relational contract, open-book system. Shorcom Ltd, 0800 SHORCOM, www.shorcom.co.nz