Simply put, Due Diligence, is the ‘Homework’ required for your project. This is the time in which you determine the preliminary scope of the project and the factors that will determine whether or not the project is feasible. As mentioned in the article “10 Essentials For Your Construction Project” every project Owner should approach their project(s) with an investor’s mindset. Every project has a determinable cost associated with it and a value of that cost.
The cost of the project is usually determinable…the size of the building(s), the amount of site work, the quantities and types of materials, and even the schedule required to complete the project. These costs are determined by your Due Diligence…getting quality estimates by qualified professionals, producing realistic preliminary site plans, and studying past projects of similar scope. Due Diligence also includes meeting with code officials, planning and zoning committees, and design professionals to determine the real estate, development, governmental agencies, and environmental requirements of the project.
The most important part of the Due Diligence Phase is to correctly associate a value of the Project with the cost.
Here are some examples:
One piece of real estate may cost more and be in a better location, but you may discover that the soil is unsuitable for your planned project.
One type of building may cost less, but require higher maintenance over the life of the building.
You may have determined the site layout that works best to serve your investment, but the local or state codes may have certain requirements that inhibit certain aspects of your development.
You may have determined your proposed schedule, but it requires that excavation work must be completed during the winter months.
Each of the examples listed above are quite common and must be included in your Due Diligence Phase work. And here’s where the investor in you must come out.
There are plenty of opportunities throughout your project to save money, but the Due Diligence Phase of a project should not be approached with a ‘Cost Cutting’ mindset. In order to complete this phase of any project, you must be willing to spend, or more properly termed - invest, time and money that you are able to walk away from if the conditions of the project do not meet your VALUE requirements. The site investigations, meeting with governmental officials, preparation of preliminary site plans, and planning of the construction program all cost money, and you need to be able to walk away from a project after spending, for example, $10,000 on these things if the information gathered during this phase shows that your project will cost more money, in the long run, than the budget allows.
Do your homework. Plan your Due Diligence Phase as you would any large investment and be prepared to change to the project as more information is obtained.
Here is a list of typical items that are included in the Due Diligence Phase of a Construction Project:
- Planning, Zoning, Re-Zoning, Annexation, and local development standards and requirements.
- Preliminary Site Plans showing approximate location of buildings, routing of utilities, boundary and topographic information, and access to the project site.
- Geotechnical Investigations
- Environmental Reports and Investigations
- Preliminary Architectural Design and Requirements
- Preliminary Proforma
- Preliminary Schedule
If you have any questions about preparing your Due Diligence requirements, please contact REDBUD Construction Services.