Need to Outsource Project Management Grows

A project manager (PM) organizes and manages a construction project on behalf of a project owner, and more and more projects are being entrusted to project managers. It seems that the need for project managers is growing in light of cost optimization.

May 23, 2019

Highly specialized PM tasks

There are two main reasons why a company might hire a project manager. One is a lack of human resources armed with the specialized knowledge needed to handle a development project. As an example, let’s look at one company’s project to build a new logistics center. When developing a new logistics center, a company needs to go through highly specialized tasks, including the development of the facility itself, as well as searching for a location and designing a material handling facility. There are few individuals who are savvy in all of these processes. Not only that, but developing a logistics center is temporary work—it can be a once-in-a-decade project—and relevant know-how is not accumulated within the company. In addition, there are no companies that can afford to employ human resources specialized in these projects. Hence, there is a growing need to outsource project management tasks to external experts. “Management tasks in development projects require skills in coordinating things between multiple parties and managing. If a company tries to do all of those tasks with their own personnel, employees will have to work overtime. Hiring a project manager is also better in terms of achieving ‘work style reform’—the word in everyone’s mouth lately,” notes Takeo Matsumura of the JLL Japan Development and Project Department, who is mostly involved in project management tasks.

A solution for skyrocketing construction costs

Another reason for hiring a project manager is soaring construction costs. “The construction costs in 2016 were 124.5% of those in 2011. It costs 1.2 times as much to construct a building. The costs have risen even more now,” explains Matsumura. The cost of building skeletal frames is rising more than the cost of interior finishing. In the majority of cases, a project manager is hired with the expectation of cost reduction.

Traditionally, development projects are contracted to architecture firms or general contractors. Both are experts in construction, but there are pros and cons for project owners. An architecture firm aims to deliver the maximum quality in a development project. In other words, their main focus is on “creating something good,” and cost management tends to be neglected. For example, a project owner may ask for a quote of approximate costs in the designing stage. “Designers only give rough figures to hedge their risks, so that they can avoid liability later on. Not only that, approximate quotes are often widely different from clients’ budgets, and the amounts of money presented by the builder at the time of tendering are often inconsistent with the budget,” points out Matsumura.

When a project is contracted to a general contractor, the general contractor will undertake everything—scheduling, managing budgets, designing, building—but there is the concern that the entire project will be put under its control and turned into a black box.

On the other hand, the role of a project manager is to monitor an architecture office or general contractor from a third-party perspective in a project, and draw out the optimum solution that meets a project owner’s requirements. Since they monitor a project as a proxy for a project owner, they have tight reins on cost management as well.

JLL has accumulated data on a diversity of development projects it has undertaken in the past into a database, and has a system with which it can examine quotes presented from an architecture office or a general contractor to find waste and negotiate. In addition, the agency’s business extends globally. Anchoring these strengths and a track record of involvement in development projects of all asset types—including office buildings, retail facilities, logistics centers, warehouses, student accommodations, and hotels—JLL provides smooth project management.

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