Presentation by Sushil Mantri at CREDAI Natcon 2015

Copyright © 2010 Mantri Developers Pvt Ltd www.mantri.in1

Insight Into Organizational And Project Cost Control

www.mantri.in

13th Aug 2015 @ IstanbulBy Sushil Mantri


Present Market Scenario:

Today >90% volumes in mid-market segment of 50–100 lakhs Mid-segment ticket size is selling, NOT super luxury amenities,

elevation etc. We have already grown, now it’s time to deliver Present wafer-thin margin scenario, our organizational efficiency

levels need to be improved, else survival difficult


In our business, anything can be justified. Prepare budgets in advance, then only commence all activities Strict control & monitoring of budgets, completion with +/- 5% With single digit margins, No luxury with us, to allow 20-30% cost hike In history, we always focused on “cost”, but today Time required for

construction, is the more focus area Even in worst scenario our “cost” may not go up by 15-20%, but any

slippage in Time/mis-management will inflate the cost overruns to multi folds

Let’s respect “TIME” - more than any other cost factors

This brings us to make detailed budgets of: Time budget Cost budget

Budget, Budget and Budget:


Primavera P6. This gives time, cost and resources all together. Track, amend, monitor is quite efficient All departments are interrelated. We need to work collectively

towards improving efficiency so that overall time & cost, we can control

Material

Contractors

Projects

Finance

Legal

HR & Admin

Liaisons

Engineering

Integrated ERP is a

MUST

We use Quadra

ERP


Business formula – Insight…

Copyright © 2010 Mantri Developers Pvt Ltd

www.mantri.in


Internal stake holders :

Design – the initiators PMC - the Planners QS - the Number masters C&P - the Negotiators HR - the Efficiency tappers Project/s – the Execution guys SMC - the Sellers Finance - the Cash flow tamers


Design – the Initiators: Parameters of Design include Time, Coefficient, Standards etc… Efficient execution derived from accurate Good for Construction (GFC)

drawings & budgets are based on GFC Consultant selection – proven track record for timely deliverables. No fancy/international names - who don’t have timely delivery track

records Set timelines first – calendar of all design activities Bring modularity in structure – type of columns, beams Better accountability, link payment with the deliverables (Don’t accept

piecemeal deliverable) Put co-efficient to be achieved as part of your WO Bonus/Penalty clause - linked to timelines and coefficients achieved Don’t forget, quality of drawings, is the quality of estimates


Proper product mix/design mix, after due consultation with your Sales team to avoid multiple alterations

During the concept stage, take multiple workshops with the consultants to analyze constructability, to provide feedback on devised cost

& specs Select materials before detailed designs, it minimizes wastage % During structural GFC stage, complete civil & MEP packages Involve MEP vendors at Design stage, they can play key role to save cost Encourage contractors to quote on cost per sft rather than on item rate

We have classified two stages of design deliverables: Global RCC GFC for full tower, at a time Global coordinated GFC, including services, at a time

Design – the Initiators:


Peer review from competitive consultants RCC, MNE On receipt of structural GFC drawings for entire tower, critically

analyze the steel & concrete quantities Vs coefficients, then only issue drawings to Projects, for execution.

Stop direct issue of drawings, from Consultants to projects.

Better design efficiencies: 80% of cost can be controlled in design stage only Based on our experience, we have devised thumb rules (quantity

coefficients) for each activity; shared to all consultants along with WO, to avoid their R&D on our project



MDPL THUMB RULES FOR ALL RESIDENTIAL PROJECT SPECIFICATION TYPES

Sl No. Description UOM

Quantity coefficients

(+ 10%)1 Concrete qty in cum / sft of BUA 0.0402 Steel qty in kg / sft of BUA 4.203 Formworks qty in sqm / sft of SA 0.344 Block Work per SBA blockwork area in sqm / SA in sft 0.155 Ceiling Plaster per SBA ceiling plaster in sqm / SA in sft 0.076 Internal Plaster per SBA internal plaster in sqm / SA in sft 0.257 External Plaster per SBA external plaster in sqm / SA in sft 0.708 Flooring other than Toilets per SBA flooring in sqm / SA in sft 0.079 Toilets Dado per SBA dadoing in sqm / SA in sft 0.03

10 Toilets Flooring per SBA flooring in sqm / SA in sft 0.00711 Painting Area per SBA painting area in sqm / SA in sft 0.4012 Windows Area per SBA % of SA in sft 10%13 MS Railings Balcony kg/ rmt length of railing 18.00 Staircase kg/ rmt length of railing 22.00

14 No. of Car Parks / No. of Flats No. of car parks / no. of flats 1.2015 Basement Area / SBA basement sft / SA in sft 0.3016 Car Park Efficiency basement sft / no. of carparks 340.0017 No. of Lifts per Apartment no. of lifts / no. of flats 0.0318 Landscape Area per SBA landscape area in sft / SA in sft 0.2019 Hardscape area per landscape area Hardscape area in sft / landscape area in

sft 30%20 Club House Area per SBA % of SA in sft 2.8%

Indirect cost thru wastage control also is a requisite.


Material allowances considered in MDPL

Material Unit Allowances

Cement Bag max 2%

Reinforcement Steel MT max 2%

Structural Steel MT max 5%

Vitrified tiles sqm max 5%

Ceramic tiles Sqm max 5%

Polished Granite 20 mm Sqm max 5%

Engineered Marble Sqm max 5%

Wooden Flooring Sqm max 5%


MDPL STANDARDS

Sl No. Description Standards

1 DG capacity max utilisation of 500 KVA, 1000KVA, 1500 KVA

2 Lift capacity Passenger – max utilization of 10 / 13 PAX; Service – max utilization of 13 / 15 PAX.

3 Window sizes (Type - 3 projects)

3.1 Lobby, Liv/Din/Family, MBR Size: 1800mm x 1200mm

3.2 Guest room / kids room Size: 1500mm x 1200mm

3.3 Kitchen Size: 1200mm x 1200mm

4 Door sizes (Type - 3 projects) 4.1 Main door Size: 1050mm x 2400mm4.2 Internal door Size: 900mm x 2100mm

4.3 Toilet door Size: 750mm x 2100mm

5 Toilet sizes (Type - 3 projects) 5.1 Master toilet Size: 2250mm x 1500mm5.2 Common Toilet Size: 2250mm x 1500mm5.3 Other Toilet Size: 2250mm x 1500mm

6 Tile sizes (Type - 3 projects) 6.1 Foyer/liv/din, all BR, kitchen Vitrified tile, Size : 600 x 600mm6.2 Bal, Utility, Terrace Ceramic tile, Size : 300 x 300mm

6.3 Toilets Flooring: Ceramic tile, Size: 300 x 300mmDadoing: Ceramic tile, Size: 300 x 450mm


Bulk buy is monetarily viable & provides better inventory control Pre-requisite is standardized products – be it window sizes, room

dimensions, shaft sizes, toilet sizes etc. Affordable housing is the current trend, it’s not “sub standard” We need to give all specifications and amenities which is a real

challenge, because you can save cost only by becoming efficient in designs, reduce wastage %, buy in bulk and execute efficiently

Use only simple speedy executable designs We also vouch for modern & innovative technologies like Aluminium form

work systems, Tunnel formwork, Pre Cast which saves time. Depending on size of project, cost viability need to be worked out.



PMC – the Planners:

PPM (project portfolio Management) allows companies to distribute resources effectively and catch issues before they become problems. We use the software tool called Primavera P6.

P6 enables us to plan, manage, control, and deliver projects of any size. From P6, Earned Value (Planned Vs Actuals) analysis is done.

Earned Value: Earned Value (EV) Analysis is a project management technique for

measuring project performance according to Project cost and schedule Earned Value (EV) = Budgeted Value x % Project Completed Entire Co. linked with EV, even now auditors accepted it


Monthly Look ahead schedule (LAS), based on available work front, is given to projects and its tracked weekly

Based on this LAS, Skilled man power (SMP) planned Vs Tracked, on a weekly basis and project team take all actions, weekly

G&O of all execution team is linked to the LAS Vs Actual EV % achieved To address and eradicate any road blocks for construction, weekly site

meeting is held by PMC and all issues resolved. Escalations further are taken to SBUH as “Critical issues”.

All stalemate & bottle neck issues, further, are addressed in the CMD- SBUH fortnightly meeting with all internal stakeholders, chaired by PMC.

We recommend in-house PMC, better controls, efficient, cost effective, less attrition, knowledge pool/bank within Company

PMC – the Planners:


QS – the Number Masters:

HO–QS is the central control point for all budget & related activities In-house team, rather than external consultants, more efficient, cheaper,

less attrition, central library rates Some basic strategies devised:

Emphasis on Quality of drawings, than BOQ’s Abide by agreed co-efficients, wastage %. This be recorded in our

contract document with consultants, contractors Standard format of BOQ’s followed, to reduce NT/VO

Value for money from customer point of view analysis for every budget/product, before any change is implemented

Doer – Checker strictly followed in entire processWe prepare every quarterly two very important reports from Primavera:

Time to complete Cost to complete


C&P – the Negotiators: Input: accurate Priced BOQ from HO-QS, with detailed GFC drawings All tenders are floated with detailed drawings to avoid surprises

to contractors. Contractors can quote 2-3% cheaper Every vagueness cost you, at each step Based on our experience we could coin some basic contract strategies:

Standardize your products - Due to standardization, you can control inventory, optimize cash blockage and even avoid pile up of inventory

Bulk purchase / negotiation leads to better cost control and better planning

Promote domestic buys (due to currency rates + Inventory issues) “Same price better quality” principle religiously followed


The criteria for contractor selection is: Track record of the contractor is evaluated and repeated orders are

issued to only proven contractors, keep Partnership approach Project Head from the contractor’s side is interviewed and approved

before awarding the contract. Org chart of team annexed to contract

Each contract is signed with date-milestones, The bonus and penalties are linked to these date-milestone clauses in contracts

Mobilization advance amounts are spread in 2-3 installments and linked to milestones achievement, so that sufficient funds are available at later stage, for project

Escrow accounts at project, with each contractor is compulsory Minimize number of contractors and go for performing contractors P1 is more important than L1 – Direct cost Vs Indirect cost

C&P – the Negotiators:


Sl. No Main Packages

1 Excavation2 Civil (General contract)3 Door frames, shutters & hard wares 4 UPVC Windows & Glazing5 Electrical6 PHE 7 Fire Services8 Lifts9 Landscape (Hardscape + Softscape)

10 BMS

11 HVAC & basement ventilation

12 Gas bank & related works

13 Swimming Pool & other water bodies (Electro Mechanical works)

14 STP and WTP (Electro Mechanical works)

15 Clubhouse ID works

16 Home Automation system

Owing to the shortage of skilled labour & blockage of cash flow we have shifted our focus to JIT items e.g. Ready made door frames, doors, wooden flooring, now exploring possibilities of readymade toilets etc.

Contract Strategy :


HR – the Efficiency tappers: Introduce PBVP (Performance Based Variable Pay)Set quantitative KRA for making employees measurableReplace out non performers – at least 10% every year Hire young people and train them, productivity very high, we have

reached to average age 34Give high importance on training of the employeesDevelop “decisive” leadership pipeline for future scalabilityHire strictly as per ORG chart, periodically re-assess requirements &

reallocate resourcesOur industry has 22% attrition levels, design backup for each role,

depend more on process than person


Projects – the Execution guys: Project guys are the end users in the construction chain, we all support

function for them, give highest importance to execution team Single point Agenda - productivity (through SMP + motivation) Remove their bottlenecks/stalemates periodically SMP linked RA bill payments Controlling Escrow a/c of contractors, to ensure optimum use of money


SMC – the Sellers:

SMC staff has incentivized on performance of sales and collections, backups for each activity

Cost optimisation is brought by standardisation of brochures, presentation material, bulk space negotiation

with media, few agencies with higher business Extensive use of salesforce.com software for better

conversions of enquiries, collection followups. Salesforce.com is interfaced with Quadra ERP Faster loan closures, negotiate with HFC for timelines, DMA


Finance – the Cash flow tamers:

Today cash flow more important than profitability Project wise separate Escrow accounts kept for handling

inflow/outflows, take ~10% for HO Many times cash flow is main reason of project delays Plan cash flow well, any slow down situations to be avoided You can manage cash flow, if you PLAN


Thank YouCopyright © 2010 Mantri Developers Pvt Ltd

Real Estate

Presentation by Sushil Mantri at CREDAI Natcon 2015