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Pert Vs Clm

Essay by   •  July 10, 2011  •  Essay  •  395 Words (2 Pages)  •  1,336 Views

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This project is about the construction of large custom homes in Maryland. Custom homes tend to take longer to build as each home is built according to customer specifications compared to spec or tract homes that are built based on design templates provided by the builder.

Spec or tract home construction provides the ability to benefit from a standardized construction process. With a small set of model homes to select from, homes are constructed according to design specifications over and over again, leading to an average start to finish time of about 6 months. Because the same steps are repeated over and over, builders learn to be efficient and to save time. Material use, cost, and delivery schedule is also standardized allowing the general contractor to manage cost base on bulk purchases.

Custom home construction significantly increases the involvement of the homebuyer. As such, buyer involvement drives the construction process of custom homes. For large custom homes, variables such as the level of buyer involvement in design (including customer provided plans), custom features and options, including the use of exotic materials or unique construction techniques pushes the general contractor to procure expensive materials and employ expensive, highly skilled subcontractors. This requires closer attention to customer driven details. This can also lead to construction duration of 1 ½ to 2 years.

The risks associated with increased buyer involvement include: increased variability of schedule, cost escalation, and custom home content. Understanding these risks allows the general contractor to better manage schedule and cost.

For custom home construction cash flows provided by the lender typically occur as various phases of the project are completed (i.e., percent completion, completion of milestones). Subcontractors get paid based on this criterion. As such, construction schedules must often be revised to meet the financial requirements of the general contractor and subcontractors to ensure they get paid on time. As a result of these cash flow constraints, it is important to allow some flexibility in the schedule so that some activities can be moved around to mitigate the risk of being unable to pay subcontractors on time.

In addition to the aforementioned variables, other variables (e.g., weather conditions, supply and demand of materials, economic factors, subcontractor availability, timeliness, and complexity of design and changes, etc.) associated with custom home building present a wide range of uncertainty with respect to completion dates and costs.

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