It’s an Outside Job

Boards often assume that their managing agent will take on the role of project manager on capital projects, which is a huge mistake. When you’re tackling an expensive project, you want it done as cost-effectively as possible. If you do not have a designated point person to oversee all the moving parts, things fall to the wayside — and time and money and resources are lost. 

Boards often refuse to hire a project manager because of the cost, which is typically anywhere from 2% to 10% of the total cost of the project. I have a condo, a prewar building with about 75 units, that needs serious facade repairs, and when I first had this conversation with the board members, they said, “We’re going to manage this ourselves.” That was six years ago, and they have yet to break ground. They have finally signed a contract with a vendor, but the amount of money spent on attorneys, engineers, architects and different vendors is tenfold what it would have been if they had hired a project manager. In this case, it’s about $500,000 higher than the original bid.  

On the other hand, one of our buildings is doing a huge elevator modernization, and when I told the board it needed an outside project manager, the board’s response was, “Why can’t we just pay you a little more to do it?” And I said, “I’d love to do it. But I can’t do the job that you need me to do and manage your building the way it’s supposed to be managed. I don’t have the time and the resources to do both.”

Once we got through that — I think it was one conversation — the board hired a project manager and signed the contract within two months, which is extremely quick. They’re about to start production of the elevator cabs, and every step of the project is lined up to a T. From the day the project manager was hired, there’s been an update every week, which makes everyone’s life that much easier, because we can inform shareholders about who needs to close their windows, or do this or that. And the vendors, who are subcontractors of the elevator company, know the timeline and what has to be done by what date. Knock on wood, we are on course to finish this ahead of schedule, which never ever happens.

This is a building we have managed for a long time, so there’s a lot of trust there. I always say to people who are looking for new management that it’s a two-way process — not only are you interviewing the company, but the company is interviewing you as well because there has to be a working relationship. A lot of boards want to go for the most inexpensive management company, and then pay it a little bit extra to oversee a project. And not once have I seen that work out to their benefit. You should always have an independent party doing this. It’s a no-brainer.