Project Management Considerations for Building Equipment Upgrades
A well-executed building equipment project can save energy, reduce maintenance costs, and significantly improve the guest experience. However, a poorly managed project can be disastrous for a hotel in terms of the resultant cost overruns, guest complaints, and long-term dissatisfaction with the installed equipment.
Project Team Structure
The majority of building equipment projects follow a fairly routine implementation process including due diligence, engineering design, permitting, mobilization, construction, and close-out / commissioning. These various project phases can be handled all by a single entity (a design/build contractor or a direct installation by an equipment manufacturer), or by multiple parties (including an engineering firm, a construction management firm, a mechanical contractor, and a commissioning authority). On occasion, an owner or operator may have the in-house capability to provide some of these services, which can add additional players to the mix.
We believe that the proper team structure should be determined based on the level of financial exposure, complexity, and risk of the proposed construction activities. For projects that require significant levels of capital, we like using a design-bid-build approach, where the hotel retains control over the project design and contracting phases – this enables market forces to dictate the most competitive installed cost, and ensures that the equipment specification is both appropriate and efficient in nature. However, there are other project delivery methods that can work well in certain circumstances including design-build and design-build with engineer assist.
When selecting project team members, it is important to understand both their technical qualifications and their experience working in a hospitality context. The best engineer or contractor in the world may still fail to meet expectations if they are not familiar with the challenges of construction in a functioning hotel – including the needs to have flexible scheduling, be respectful of guests and employees, and understand that mistakes will happen but must be resolved expeditiously.
For a front of the house renovation, there is generally a fair amount of "buzz" around the project and the resultant improvement to the property. However, this same level of communication is oftentimes lacking in building equipment upgrades. This can result in the operations team feeling left out of the process and therefore unable (or unwilling) to accommodate the difficulties of building equipment upgrades. That's why the operator's involvement during early project planning is an important first step.
The involvement of the hotel operations team – starting with the engineering team but going beyond to touch the other hotel departments – improves the probability that the due diligence phase will correctly identify all existing issues. It further encourages buy-in on the part of personnel who will have to live with a construction headache for a short to moderate timeframe.
Before work begins, the project manager should ensure that the hotel operations team understands the following critical aspects of the project:
- The scope of the project and benefit to the property
- The duration of work
- The area affected by the work, including material staging if required
- Anticipated service interruptions (i.e. electricity, water, heating/cooling, etc.) during the work
- Any potential construction impacts including sound or vibration that may extend beyond the direct area of work
- The level of oversight and time commitment required on the part of both the project manager and hotel operator (if different entities)
The scheduling process should begin with an understanding of a hotel's operating patterns and constraints. This should ideally occur when the project is first contemplated so that the project schedule can permeate into the design documents, bidding process, contract award, and construction phases. Topics for discussion should include the following:
- When are the busy times of year for each department?
- Can the project be scheduled around peak occupancy or rate timeframes, or outside of typical periods of high corporate client demand?
- From a mechanical equipment perspective, what is the best time of year to execute the project? For example, a chiller replacement during hot summer months would not be ideal.
- Will the project require temporary services? How might the design minimize the duration and cost of these services?
A very detailed project schedule should be prepared prior to construction. In fact, some projects may require a conceptual schedule as part of the contractor's bid proposal. A good schedule will create synergy amongst the project team, minimize disruptions to hotel operations, and enable the contractor to perform the job in accordance with the agreed upon contract value.
The project manager should confirm that the schedule includes the following elements:
- Timeframe estimates for due diligence and engineering design
- Permitting periods
- Procurement phasing, especially for any long lead-time equipment such as chillers or cooling towers
- Material staging and access to the project site
- Time allowances for critical tasks, including sequencing for tasks that must occur in chronological order
- Periods of utility service interruptions
- Periods of anticipated noisy or disruptive activities
- Periods of anticipated off-hours work
Risk Management and Contingency Planning
Most of us in the hospitality sector know that things can go wrong quickly once construction is underway. That's the reason that good project managers will talk with their teams about risk management and create a contingency plan.
The project manager should focus on asking targeted questions of the hotel operations team, design engineers, and installing contractors to pinpoint the areas where there is the highest level of risk. The following questions are a starting point:
- Has the due diligence process been exhaustive in nature?
- Do the design documents address any potential changes in space use?
- What type of contract is appropriate to use, and what level of legal review is required?
- Should the contract include recourse if the contractor fails to perform?
- Are hidden or unknown conditions addressed in the owner/contractor agreement?
- How stable is the installing contractor's cash flow? Should the project be bonded and what is an appropriate level of retainage?
- Will the contractors' personnel be in direct contact with guests?
- What activities have the greatest risk of adverse impact to employees and guests?
- If there are unforeseen delays, how will this impact the hotel (particularly key revenue events)?
- Should a third party be retained to verify that operation is consistent with design intent?
Quite regularly, engineers and contractors are tasked with selecting replacement equipment at a hotel without a full understanding of the existing conditions. And more often than not, that uncertainty results in additional design and construction costs. These issues can be largely avoided for future maintenance events with better project closeout. A good closeout package should provide the hotel engineering team (and future engineering staff) with installation dates, basic system information, recommended maintenance intervals and where to begin when troubleshooting a problem.
The project manager should request that the closeout package include items like the following:
- Construction Documents
- Contractor Shop Drawings
- Test and Balancing Reports
- Manufacturer Start-Up Reports
- Operation and Maintenance Manuals
- Training Videos for Future Maintenance Staff
- Substantial Completion & Equipment Warranties
- Point(s) of Contact for Routine Inquiries
Providing a thorough closeout package can also be beneficial to the installing contractor, as it provides a resource for engineering staff and increases the likelihood that the contractor gets the first call for future service work.
Putting it All Together
Strong project management is a fundamental component of any renovation, and back of the house equipment projects should be viewed no differently. We recommend that the project management considerations outlined in this article should be reviewed early in the planning process – to identify the correct project team and provide for seamless project delivery during all phases of due diligence, design, and construction.
Project managers who oversee HVAC and MEP system upgrades should not only have a strong technical background, but also should be well versed in the financial decision making process for both capital and ROI upgrades – to support project execution that is aligned with the owner's investment goals for the asset.
With the right information in your hands and the correct personnel at the helm, building equipment improvement projects can be highly beneficial to both the guest experience and the bottom line.