How to Start Construction Project Management Consultancy?
Construction project management (hereinafter called as CM) is a professional service that uses specialized, project management techniques to oversee the planning, design, and construction of a project, from its beginning to its end. The purpose of CM is to control a project’s time, cost and quality.
Whether an owner, contractor or investor, constructor need to deal with a range of requirements during every phase of your construction project. The project management services provide contractor with comprehensive supervision, inspection and commissioning services for all types of projects – no matter the size or location.
The market for construction project management services is huge and includes residential and commercial construction projects. However, due to the nature of the construction industry, you would be well advised to specialize or focus on either residential or commercial construction project management.
Following are some major points of attention to start construction management business:
Legal structure of business: The initial step while starting any business is to choose legal structure of business entity. You could choose any one of them. These options are:
- Sole proprietorship
- Partnership firm
- Limited liability partnership firm
- One Person Company
- Private limited company
At initial stage if you are solely interested in starting a business sole proprietorship is better option. If some of your friends are also interested in this business then partnership or limited liability partnership would be better.
If you want to expand your business or start with high amount of capital than One Person Company or Private limited company would be better option.
Registration under service tax: CM is kind of management consultancy which fall under purview of consultancy services in service tax. Hence registration under service tax is required. However service tax general notification is applicable on this services under Notification No 33/2012-ST, dated 20.06.2012 – Exemption to Small service providers having taxable turnover of less than 10 Lakhs and providing services other than by way of under a brand name.
Obtain the Necessary Permits and Licenses for Your Business: Find out what licenses and permits you will need. You will need to take care of this on federal, state, and local levels. In construction, there can be a lot of these, so run your list by an attorney and make sure you are not missing anything.
Choose location for your business: Decide how to best serve the clients you want to reach. Be accessible. Where you set up shop will determine how well you are able to do that.
Develop a good business plan: Business plan is required because of two reasons firstly, because it help in requirement of funds. Secondly, construction management is a broad description. You need to narrow it down. Do you plan to do residential or commercial construction? Will you specialize in new construction, or will you focus on improvements, and additions? With the right roadmap comes the right focus.
Secure the Proper Finance: You will need to secure loans, find investors, or apply for grants to get your business off the ground. Real estate industry is one of the most risky business fields. CM is associated to real estate development so it needs to plan finance structure for your business carefully.
Understand Your Responsibilities as an Employer: This term seems to be so unimportant but it is most important term in CM business. Because each state has specific legal steps that you will need to take when dealing with employees. A clear understanding of these procedures will help you avoid legal entanglements down the line, both in terms of whom you hire and, unfortunately, whom you fire.
How to obtain construction management project
The project owner will share project information to a large group of contractors, general contractors or subcontractors to solicit bids. The process starts with a cost estimate from blueprints and material take-offs, telling the owner how much money he or she should expect to pay in order for the contractor to complete the project.
There are two kinds of bids:
Open bid: Used for public projects and usually promoted with advertising, an open bid invites all contractors to submit their bid.
Closed bid: Reserved for private projects, a closed bid is when the owner sends invitations to a select number of contractors so only they are able to submit a bid.
Then, once the owner receives all the bids for the project, he or she can select the contractor through a number of ways:
Low-bid selection: This method focuses on the project’s price. Contractors submit their bids with the lowest price they would complete the project for, and the owner chooses the contractor with the lowest one.
Qualifications-based selection: This selection method picks a contractor solely based on qualifications. The owner will ask for a request for qualifications (RFQ), which gives an overview of each contractor’s experience, management plans, project organization, and budget and schedule performance.
Best-value selection: By combining both price and qualifications, the owner looks for the contractor with the best cost and best skill set.
And finally, once the owner chooses a contractor, there are four different kinds of payment contracts they can agree upon:
Lump sum: A lump sum contract is the most common. The contractor and owner agree on the overall cost of the project and the owner is required to pay that amount whether or not the project fails, or if it exceeds the initial price.
Cost-plus-fee: The owner pays the total cost and a fixed fee percentage of the total cost to the contractor. This is the most beneficial contract for the contractor, since any additional costs will be covered.
Guaranteed maximum price: The guaranteed maximum price contract is the same as the cost-plus-fee, except there is a set price so the total cost and fee cannot exceed.
Unit price: This contract is chosen when both parties are unable to determine the cost ahead of time. The owner provides specific unit price to limit spending.
Construction project management combines the responsibilities of a traditional project manager with the skills and expertise of the construction industry. Because construction projects are always changing, a successful construction project manager needs a wide range of skills and abilities to manage diverse teams and projects.
So, construction project management consultancy great business idea.
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