Hidden Costs of Design & Construction, Pt I

Design & Construction at a Glance:

• Cost overruns happen most frequently when clients don’t spend money upfront to turn over stones
• Hidden costs in construction are just that, unforeseen and unplanned surprises
• It’s essential to have a nucleus for construction – a controlling force that keeps everyone and everything moving forward

A Q&A with Zach Grigsby, Director of Construction Services, on how banks can optimize their budgets and avoid cost overruns with branch construction

Bank branches aren’t just buildings; they’re places where relationships are started and sustained. “While the digital age has undoubtedly upended the majority of consumer-facing industries, banking still has a particular role in people’s lives,” according to Believe in Banking. “And it’s one steeped in trusting relationships.” Branches are where in-person experiences create champions for financial brands. In fact, branch locations are so foundational to the banking experience that two-thirds of consumers want them right in their neighborhood, according to a massive Accenture survey of 50,000 bank customers worldwide.

Whether it’s a fresh approach like the café concept, an efficient micro format, a high-function flagship or a North Star prototype, banks and credit unions all need smart design and comprehensive construction to ensure branches can live up to their potential. That means prioritizing upfront planning, whether it’s a ground-up build or a branch conversion after M&A. For branch conversions, a detailed analysis of current conditions will prevent cost overruns. For ground-up builds, having a partner adept in the permitting process will help prevent costly delays. With so many steps in branch design and construction, it’s time to call on the experts.

To shed more light on the construction process and how to keep costs in check, Zach Grigsby, Adrenaline’s Director of Construction Services, shared his insights in this illuminating interview. 

Tell us about hidden costs. What do you think people may not know when it comes to branch construction?

Cost overruns happen most frequently when clients don’t spend money upfront to turn over stones. In an industry best practice, it’s necessary to provide a rough order of magnitude estimate, which really is going to inform the construction document, pre-construction services and construction phase. General contractor plans are typically based on either some degree of formal estimating or a standard cost per square foot formula based on space size. What Adrenaline does differently is using that estimate information paired with site observation reports, site and existing condition surveys, review of leasehold documents, and city codes, etc. We turn over those stones, so clients can start their project being informed about what they are getting into.  

For the best outcome, banks should undertake a detailed due diligence process upfront as early as the start of design. This allows them to know the condition of this existing building and what it is going to cost to fix all the things not readily observable to ensure code compliance and functionality. What are problem areas within this branch that we’re going to have to address that wouldn’t be captured in a typical cost per square foot for a space like this, for example? And what are going to be some considerations from a local, municipal and jurisdictional level that will influence timelines and costs?

How can clients go into construction with their eyes wide open?  

In an ideal situation, clients should start the due diligence process very early in a project’s life cycle. It can be as early as when a client is first considering a parcel of land or existing space where we will study the Letter of Intent (LOI) lease. We do a site observations report before they put pen to paper and produce an existing condition survey reporting those “gotcha moments.” Those are the surprise hidden costs. Ultimately when you talk about hidden costs in design and construction, those are the things that are often simply overlooked and not considered early in the project life cycle.

What’s one of the most important ways our experience supports clients?

The most successful clients partner with companies that can manage the due diligence phase as a construction manager. What I mean by that is in construction management, you need a nucleus of a project, rather than having a client who has 30 vendors that are responsible for doing 30 different things. Working with experience design companies, they have designed the building – including the schematics, interior design, and exterior design – and engineered the building structurally with mechanical, electrical, and plumbing systems. They lead and execute that work and are the controlling force that keeps everyone and everything moving ahead, instead of different departments managing all these different vendors. In a typical construction model, there are a lot of gray areas that don’t get connected. That’s a hidden cost right there, because you didn’t know your IT department needed 13 extra junction boxes for data, for example. It’s essential that a partner is always connecting those dots in construction because all of those things are happening at once, and must be kept on track and coordinated.

The same thing needs to be done from a due diligence perspective, including a site observation report to understand the limitations of a site or of a building. We do a 360 scan uploaded to our proprietary gateway, which provides a huge technology edge in construction. It’s where you can house a documented record of existing conditions that can be referenced at any time. Another best practice is to do things like testing and municipal code early. If there is a downtown preservation board or historical district, it’s important that partners know how to work with them and understand all of those requirements. Instead of doing all of those things in a vacuum, it’s essential to do all of those things at once as early in the process as it makes sense to do.

What we’re able to do as soon as a client says “go” is inform a realistic budget and a feasible timeline. By doing that, it prevents surprises in cost later down the line. Banks and credit unions should seek out processes that limit surprises. For example, our change order ratio on projects based on industry standard is tiny – at only 2% where the industry standard is closer to 10%. That’s because of all of the work that happens up front. Our team of construction experts is part of the process from day one – managing, informing and consulting to make sure no stone is left unturned, so that clients can get a realistic expectation that can be delivered on.

To learn more about branch design and construction services for your bank or credit union or to speak with one of Adrenaline’s experts, contact us today.

Adrenaline is an end-to-end brand experience company serving the financial industry. We move brands and businesses ahead by delivering on every aspect of their experience across digital and physical channels, from strategy through implementation. Our multi-disciplinary team works with leadership to advise on purpose, position, culture, and retail growth strategies. We create brands people love and engage audiences from employees to customers with story-led design and insights-driven marketing; and we design and build transformative brand experiences across branch networks, leading the construction and implementation of physical spaces that drive business advantage and make the brand experience real.