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Major works – the value of project management

Major works – the value of project management
3rd June 2019 Editor

Clear Building Management set out some advice for resident-led management companies on how to work effectively with your managing agent, to ensure that your major works do not turn into a major hassle.

Major works projects need effective project management to keep them on track and on budget.

We regularly have RMC directors coming to talk to us because they are frustrated that their managing agent has either not started tackling essential major works projects or, where works have been identified, the project has not progressed. Whilst major works can be a hassle to residents, they are generally preferred to the development sliding into disrepair.

So why do so many managing agents fail to get a grip on major works at their estates?

One reason for the lack of proactivity on major works can be down to the project management element and how it is costed. Because the project management work is not necessarily a “regular management function”, it often falls outside the standard management fee and so there is less incentive for the managing agent to get on with it.

How should the project management be paid for?

Where the project management falls outside of the management fee, there are generally three options:

  1. Managing agent carries out the project management on a percentage cost basis

Many managing agents charge for major works project management at a percentage cost of the overall project. Indeed, it is often the default option for agents using the model management agreement provided by ARMA to its members. Whilst the metrics are easy to understand, there is a clear flaw in this approach, as it does not incentivise the agent to get best value for leaseholders!

  1. Managing agent carries out the project management on a fixed fee basis

A fairer and more transparent option is when your managing agent can provide a dedicated person to project manage the major works, and charge on a fixed cost basis. This gives predictability over costs and helps to ensure they are acting in leaseholders’ best interests.  But, as with option 1, you need to be confident that your managing agent has the skillset (and the time) to deliver the project.

  1. An independent third party is appointed to project manage the major works

The third option is to appoint an independent project manager such as a surveyor, appointed in consultation with the RMC. An independent project manager gives the advantage of having a dedicated specialist to project manage the work – something that can be critical when it comes to the Section 20 consultation. Section 20 is an essential part of the major works process if you are to recover contributions through the service charge. It involves drawing up specifications, carrying out a competitive tendering process, overseeing the schedule of works, as well as signing off on completion. All of which needs time and resource.

Both managing agents and their RMC director clients need to be aware of their limitations; we are talking about people’s homes and it’s essential to have the right people managing the major works project. By cutting corners to save a few pennies, major works can stall, run over time and/or over budget, or not meet leaseholder expectations.

Get clarity on your managing agent’s major works expertise and their charging structure. This can then help you choose the right project management support for your major works.

At Clear Building Management we firmly believe that the percentage fee basis (option 1) is neither fair nor fully in the best interests of leaseholders.

Instead, we offer all our clients a choice between appointing an independent project manager OR a dedicated project manager from within the Clear team.

With each route, we are able to offer 100% transparency and a commitment to acting in leaseholders’ best interests. And, if the complexity of a particular project is outside of our skillset or experience, we would always encourage our client to appoint an independent project manager.

For a clearer and more transparent approach to project managing your vital major works projects, talk to Clear Building Management. We’d be pleased to help you understand your options.

Click here to get in touch with the residential property management specialists at Clear Building Management.