General Conditions

General conditions are the one active budget line throughout the project, unlike trade budgets, which you close when you buy the subcontractor. The general conditions remain alive and well.

Since they remain current, they need to be tracked and managed. Do you have enough dumpster money to finish, what is your porta-john situation? These items will be required even if the budget is light, but how will you manage the situation? You must spend the money, but how will you do that? What has caused the condition? Have changes increased the duration? Have you covered these costs? Do you have money left in other lines to use as an offset—either way you need to know the answer.

Your contract type may change your approach to recovering the cost overruns. With a cost-plus agreement, make sure the owner is aware there will be additional costs; general conditions are just as important as letting them know the paint cost exceeds the current budget. The tough part with general conditions costs is that the Client sees a different value here than they see in finish upgrades. Know where your costs are and have a strategy in mind.

Remember, schedule impacts may not have a direct cost impact other than General Conditions. The tile selected costs little, but it will be here in time. Who pays the time impact when the Super is on-site for an additional six weeks? Six weeks at $1,000/day is $30K plus OH&P and lost opportunity cost of say $45,000. They may want to select another tile to save the delay impact cost of almost $100,000. They won't know if you don't tell them. It is your job to keep your client apprised of all schedule and cost impacts to the project. Be honest, tell them early so they can make sound and timely decisions—you would want the same if you were in their shoes.

Most clients have seen the general conditions lines in the budget, so don't shy away from showing them the associated costs when you discuss the issue. If you say $1,000 per day, it has less meaning than trailer rent, porta-john rent, and dumpsters. They have less to argue when you want to know how to pay for the toilet.

Management tip:

One strategy is to do a general conditions cost breakdown, with each change having a time impact. Put it on the table early and show the details. If you can present it, you can argue it. If you support and win, you get paid—the alternative stinks.