2011 January :: The Construction Management Pro

What is a Scope of Work and why do I need one?

January 26, 2011

For real estate investors, or any one undertaking a project, a Scope of Work is essential to communicate to your contractor what is to be done. Often the SOW will include time of performance and what constitutes successful implementation of tasks.

I have heard real estate investors complain that projects cost more than expected; that things that should have been in the contract were considered extras. That the quality of materials used was inferior and unacceptable to the owner. All of these could be avoided if an appropriate Scope of Work was developed and communicated to the contractor.

In the construction industry, a Scope of Work is a list of all the tasks to be performed by a specific company. I use the Scope of Work as an addendum to the standard boiler plate contract. Failure to have an adequate scope of work leads to misunderstanding regarding what is in and not in the contract, what quality of materials and fixtures are to be incorporated into the project and what is the standard of acceptability.

I had an occasion to work with a software firm in the development of a new product. We spent several meetings discussing what the product was to do, what problems it was to solve and the user interface. In essence we were developing a scope of work for the contractor regarding the design and development of the program. This is applicable to any industry that is project based.

I believe in the three C’s of project management – Communication, Coordination and Confirmation. The Scope of Work is the start of the Communication process. Without that, you reduce your project’s chances of having a successful and satisfactory outcome.

Developing a Scope of Work is not rocket science or astral physics. It does take some experience and a sense of detail. The more detail the better. After a while, you will find that a lot of it can be put in boiler plate form. After all, there are very few truly unique tasks in housing renovation.

  1. Review your project, room by room, inside and out. It is good to use a check list so that you don’t miss anything. Develop a methodology for the inspection. You may want to start on the outside at the roof line and work your way down to the foundation and site work (landscaping, paving and fencing). Inside you may want to start in the basement and work your way up or vice versa. There is no right or wrong way, just be consistent.
  2. Identify what work you want done, the quality of the material and who is going to do it. Make note of specific items that you think your contractor may overlook or have been an issue in the past.
  3. If you will be hiring separate trades, be sure that all the work is assigned to a contractor and that you have not included the work in more than one contractors work list. For example if you are installing windows, who will install the window trim? Will this be the window installer or your carpenter? Be as specific as you can. For instance specify the finish for your door hardware (brass, brushed nickel etc., front and rear doors to be keyed alike).
  4. Include all tasks the contractor is expected to perform – supply and install, clean up to dumpster provided by owner (or taken off site and disposed of in accordance with all applicable laws and regulations).
  5. Include non-construction tasks that are specific to a trade or tasks. With your electrical and plumbing contractors, for example, you will want to include applicable permits for both, and you’ll also want to add a scope item specifying that each is responsible for coordinating their work with the other and passing inspections.
  6. You will be creating some general scope items called in the trade General Conditions. Sometimes these are incorporated into the contract sometimes into the Scope of Work. Again, neither is right or wrong, just be sure to incorporate them somewhere and be consistent (having them in both places is not a problem). Some of these items may be progress reports, cleanup, safety issues, and coordination of activities with others working on the job etc. Are there any tasks that might result in long term liability such as environmental, unusually hazardous risks, or security?
  7. Once completed, transmit this Scope of Work to your contractor for review. I schedule a follow up meeting at the site to review the scope with each contractor to ensure all items are understood, and that the contractor is in agreement with the scope. This should be done before a contract is awarded.

Once developed, it can be used as a template for future projects. Be careful not to get lazy! Each project should have its Scope of Work tailored to the needs of that job. Your template needs to be carefully reviewed so that you include all work you expect to have done.

Your Scope of Work should include your company’s name, the contractor’s name and the name and location of the project. As the first step in the project process, it is then tied to the schedule of values, progress payments, acceptance/rejection of work and final acceptance of the project.

Many organizations use construction Scope of Work and Specification templates from pre-programmed software or forms. Some commonly uses sources are:

  Housing Developer Pro,Community Development Software, LLC, www.communitydevelopmentsoftware.com
Neighborhood Reinvestment Corporation, www.nw.org
R. S. Means Company, www.rsmeans.com
Associated General Contractors (AGC) of America, www.agc.org
Northwest Builders Network, www.nwbuildnet.com

The more your can automate this process and customize templates, the more effective you will be in managing costs, quality and have a successful project.

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What to Make of Housing Data

January 26, 2011

What should the layman and real estate investors in particular think is going on in the housing sector and what does it mean to us, given the conflicting economic news? Is there any consistency in these reports, any shred of truth to be gleaned?

CNN reports that “Permits for housing construction soared in December, while initial construction of homes declined, the government reported Wednesday.  “Last month didn’t look so hot for construction, but the future looks a lot better,” said Mike Larson, a housing industry analyst for Weiss Research.   The number of permits for future housing construction surged to a seasonally adjusted annual rate of 635,000 last month, up 16.7% from the revised rate of 544,000 in November, the Commerce Department said. That was the biggest monthly rise since June 2008 and leaves the total number of permits at the highest level since last March, said Larson.”

Reuters reports “Applications for U.S. home mortgages increased last week as interest rates dipped to their lowest in a month, an industry group said on Wednesday.  The Mortgage Bankers Association said its seasonally adjusted index of mortgage application activity rose 5 percent in the week ended January 14.  Fixed 30-year mortgage rates averaged 4.77 percent in the week, down 1 basis point from 4.78 percent the prior week. The rate is down from 4.93 percent at the end of December.”

Reuters also reports “Payrolls will grow in almost all U.S. metropolitan areas this year, but the gains will be slight, according to a forecast from IHS Global Insight, Inc. released by the U.S. Conference of Mayors on Wednesday. The report found that 88 percent of the country’s metropolitan areas, 319 in total, will see employment growth this year, and in 2012 all metro areas will see some job gains. But in 150 metro areas, employment will increase by less than 1 percent. By the end of 2011, 156 metropolitan areas will have unemployment rates of 9 percent or higher, while 30 areas will have unemployment rates of 6 percent or below”

The National Association of Home Builders report that “Housing will see gradual improvements in activity this year as the nation’s economy and job market continue to move to higher ground, establishing momentum that will produce more considerable gains in 2012, according to economists who appeared at the NAHB International Builders’ Show in Orlando on Jan. 12.”

And finally CNBC.com reports “In an encouraging round of earnings reports, major banks say fewer mortgages are going bad, credit card defaults are down and more people are paying the bills on time. One of the nation’s largest consumer lenders, Wells Fargo, said Wednesday that 29 percent fewer loans went bad in the last three months of 2010 than the year before. And late payments on loans considered likely to default declined for the first time since 2008. Late payments on credit cards issued by Bank of America, JPMorgan Chase and Citigroup also improved at a record pace at the end of last year, according to an analysis by Barclays Capital.”

Yet the Times headline is “The bleakest year in the foreclosure crisis has only just begun.” They continue withLenders are poised to take back more homes this year than any other since the U.S. housing meltdown began in 2006. About 5 million borrowers are at least two months behind on their mortgages and industry experts say more people will miss payments because of job losses and also loans that exceed the value of the homes they are living in. “

So what are we to think? If I had the answers, I would be living in Tahiti, drinking mojitos now. But here is my take.

You have to separate new construction data from existing home data. New homes sales and starts are driven by homebuilders. Their bench mark is the ability of the market to buy new homes, usually in the move up and high end market. This has a direct impact on the health and recovery of the housing construction industry. Very important yes, but that is more job related than housing related. Can our economy recover without a recovery in construction jobs is a valid question, one for another blog post.

Existing home sales in my opinion is a better gauge of the quality of the housing sector. It incorporates the entire spectrum of housing prices, from first time home buyer homes to the move ups, to McMansions. It reflects what willing and able buyers are prepared to pay for products that are on the market today. It also reflects anticipation of home values in the near term and their ability to pay. By this I mean, do households looking to purchase a home believe they can get a better deal if they wait a month or two. Now this is a function of employment expectations, home prices and mortgage interest rates.

Generally, employment data is telling us the worst is over. Companies are no longer shedding jobs. An uptick in mortgage rates means that it is better to buy now rather than wait. The only open question for those looking to buy a home is the anticipation of housing value. This is where the media does the housing sector and the economic recovery a disservice. Bad news is always more interesting to report than good news. We all know the adage, “If it bleeds, it leads.” Constantly reporting the take of the doom and gloomers reinforces any uncertainty consumers have. The purchase incentive must out way the resistance created by the naysayers. As an investor, this tells us that our products must be the best available at that price point in the market place, bar none. Oh – yes, at TCAI, that is our mission statement.

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Secretary Chu Announces Major New Recovery Act Milestone: 300,000 Homes Weatherized

January 26, 2011

WASHINGTON - U.S. Department of Energy Secretary Steven Chu today announced that states and territories across the country have now weatherized more than 300,000 low-income homes under the Recovery Act, a major milestone in the Department’s efforts to reduce home energy bills for families.  This means that states are now more than 50 percent of the way toward meeting President Obama’s goal of weatherizing approximately 600,000 homes under the Recovery Act.  The weatherization program is helping families save money on their energy bills by improving home energy efficiency with upgrades like insulation, air-sealing, and more efficient heating and cooling systems.   The program has also trained a new generation of clean energy workers and is employing more than 15,000 workers nationwide. 

 ”Today marks a major milestone for the weatherization program and shows once again that we are on pace to meet the goals of the Recovery Act.  This program has already benefitted 300,000 low-income families and put thousands of people to work,” said Secretary Chu.  “Through the weatherization program, we are laying the groundwork for a broader efficiency industry in the U.S. that will help grow our economy while saving money for American families.”

 Through November, the network of state offices, local agencies, and weatherization providers has completed 300,000 homes. Of the total, more than 100,000 have been completed in just the last four months, showing the dramatically accelerated pace of weatherization under the program.  A state-by-state breakdown of the homes weatherized through November is available on the Energy Efficiency Pillar page.

 Weatherization assistance reduces energy consumption for low-income families on average 35 percent, saving families on average more than $400 on their heating and cool bills in the first year alone.  Nationwide, the weatherization of 300,000 homes is estimated to save $161 million in energy costs in just the first year. 

 DOE has worked closely with state and local governments to ensure the program is well-managed, responsive, and flexible.  Nearly all of the states and territories involved in the program have met the milestone of weatherizing more than 30 percent of their targeted number of homes and many have completed more than half of their goals to date.

 Read more information on the Weatherization Assistance Program.

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 Follow the Department of Energy on Facebook, Twitter, Youtube and Flickr. Follow Secretary Chu on his Facebook page.

 Media contact(s): (202) 586-4940

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College Internships at PECO

January 25, 2011

Please forward to anyone that might be interested. All internships begin June 6th.

PECO serves 1.6 million electric and 491,000 natural gas customers in southeastern Pennsylvania and has about 2,500 employees. Founded in 1881, PECO is the Pennsylvania’s largest utility, operating and maintaining a network with 550 electric substations, 21,000 miles of distribution and transmission lines, 27 natural gas gate stations and 6,600 miles of underground gas mains. Locations in Pennsylvania including Philadelphia and surrounding suburbs.

This is a temporary academic internship, 40 hours a week, flexible hours can be scheduled between 7 AM to 5:30 PM to reach 40 hours. Pay is determined by major and year in school. Academic intern students are required to pass a drug test and background investigation.

Requirements:

Must be actively enrolled in a college level program. Strong skills in MicroSoft Office Suite, including proficiency in Excel and Access.
Must be a US Citizen or Permanent Resident and/or alien authorized to work in the US on an unlimited basis
Minimum GPA Cumulative 2.8/Major 3.0

Philadelphia New Business
Support subject matter experts in capturing, compiling and documenting requirements for construction projects. Compile/develop key business
metrics. Project manage orphan meter reduction initiative and hard cover/Hendrix material recovery program. Compile process documentation
and/or training materials to ensure consistent compliance with accepted work practices. Perform basic project coordination activities like
facilitating meetings, capturing meeting minutes, following-up on key tasks, etc. and basic support for the business as needed.

Safety
An intern in the Safety department will support Safety professionals in developing solutions to emergent safety concerns, perform jobsite
audits to ensure compliance with all Safety policies/procedures, help manage the departments corrective action program, and assist in
recordkeeping. The successful candidate may be required to report to various field locations to provide immediate support to Safety issues.

PECO GAS
Support the Gas Engineering department. The Gas Department is responsible for providing Gas services to customers in Bucks, Chester,
Delaware and Montgomery counties.

Customer Operations
Customer Operations strives to be recognized as a leader in customer service and a reliable and consistent provider of accurate and timely
information to all customers.

PECOs Revenue Protection Department
PECOs Revenue Protection Department is responsible for the identification, investigation and resolution of illegal meter and service conditions to ensure public safety and to reduce revenue leakage.

To apply, please visit www.Exeloncorp.com/careers and search position
number 10249.

Finance Intern

This is a temporary academic internship, 40 hours a week, flexible hours can be scheduled between 7 AM to 5:30 PM to reach 40 hours. Pay is determined by major and year in school. Academic intern students are required to pass a drug test and background investigation.

Multiple positions available with PECO Finance and Accounting!

Support the PECO Energy Finance teams in analyzing and reporting financial results and forecasts,provide basic finance support for the
various finance teams as needed.

Requirements:

Must be actively enrolled in a college level program Pursing a Bachelors degree in Accounting, Finance, Economics or Business Strong skills in MicroSoft Office Suite, including proficiency in Excel and Access.
Must be a US Citizen or Permanent Resident and/or alien authorized to work in the US on an unlimited basis
Minimum GPA Cumulative 2.8/Major 3.0
To apply, please visit www.Exeloncorp.com/careers and search position
number 10250.

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