Real Estate Analysis: Environments and Activities: Precommitment and Postcommitment: An In Depth Look With Regards to Construction

By Andrew Spaunhurst

Precommitment activities are the stages of the development process that occur before the developer has committed significant resources to the project. Subsequently postcommitment activities are the stages of the development process that occur after the developer has committed significant resources to the project. “If the project has not been killed during the precommitment stages of the process, the developer is now ready to champion the deal. After crossing into the postcommitment stage the developer puts all its force and energy into the project’s success” (Diaz & Hansz, 210). Postcommitment stages include designing the project, constructing the project, and managing the asset.

Throughout the precommitment and postcommitment stages there are three common types of estimates. They are the conceptual estimate, preliminary estimate, and detailed or final estimate. According to Construction Estimating Using Excel the conceptual estimate is an estimate prepared while the project is still in a conceptual state. The conceptual estimate is used to study the feasibility of a project or to compare two potential design alternatives (for example, a concrete structure versus a steel structure or three stories versus four stories). These estimates are based on a very limited set of drawings, which are produced by the architect. The preliminary estimate is an estimate prepared from a partially completed set of drawings, usually 35%-50% complete. It is used to check to see if the proposed design is on budget and to identify changes to the design that need to be made to meet the budget. Final or detailed estimates are used to prepare bids and change orders, order materials, and establish budgets for construction projects.

Construction of the building must comply with local zoning ordinances and building codes. According to Construction Materials, Methods, and Techniques, building codes regulate the design and construction of buildings and provide minimum standards to safeguard life, limb, health, property, and public welfare. Codes control the design, construction, use, and occupancy of buildings and the location and maintenance of the buildings within their jurisdiction. In some cases equipment is also regulated by code. Local and state building ordinances typically adopt one of the four model codes: The Uniform Building Code (UBC) published by the International Conference of Building Officials (ICBO), the Standard Building Code (SBC) published by the Southern Building Code Congress International (SBCCI), the Boca National Building Code (BOCA/NBC) published by the Building Officials and Code Administrators International, or the International Code (IC) published by the International Code Council (ICC).

During the construction process detailed scheduling techniques are implemented to make sure the project is delivered on time and under budget. The two main purposes of scheduling are to force detailed thinking about the constructability of the project and also to improve communication between the project managers, the owners, architects, general contractors, subcontractors, engineers, and inspectors. Project schedules can take many forms and range form simple to complex. Simple schedules include bar charts and include minimal amount of information such as activity name and duration of each activity. Bar charts fail to link each activity by their relationship, for example the reader will not know if one activity must finish in order for another to start. More complex schedules such as the Critical Path Method (CPM) arrange activities in a logical order. In the picture below the activities are arranged according to a start-to-finish relationship. The activities that are highlighted are those that are critical to the project. An activity is critical to the project if it cannot be delayed. In other words if the activities highlighted take longer than expected than the whole project will be affected. The activities that are not highlighted are not considered critical and can be delayed without impacting the overall completion date f the project. Schedules can also be coupled with cost and resources. The graphs below are based off of the CPM schedule with loaded costs and equipment.

As you can see once the construction part alone of entrepreneurial activity has many aspects and cannot be completed by one person. Investment activity as a whole requires the work of many individuals and many agencies in order to construct only one project. It is the countless hours of work by many individuals that contribute to our built environment and is something every person benefits from.