Construction Loan Consultant Expectations

By Thomas Guist, PE

Monitoring a commercial construction project is a much more comprehensive process than simply “checking the draw”.

Reviewing the contractor pay application of a construction loan for a lender is the most critical aspect of the monitoring process, but a quality consultant does more than just that.  At the start of a project a consultant should understand the dynamics between the borrower, contractor and lender, and help find solutions to the flow of information to make the process as efficient as possible. Borrowers want their projects completed on time and at budget by the contractor. Contractors want their pay applications funded in as little time as possible. Lenders want both of the previous two items for the borrower and contractor and to be confident in the overall investment they are making. Even with the importance of the above, the way to make the lender confident also includes many responsibilities a commercial construction professional should undertake on behalf of the institution financing a construction project.

Quality Control

While the construction professional is typically onsite only one day per month, sometimes even for just a short time depending on the complexity of a project, there remain quality control indicators that should be reviewed as part of the monitoring inspection.

  • The construction inspector should always review updates to the project plans located onsite to document any major changes that may create additional costs or impact the value of the project.
  • The building permits should be reviewed to ensure the contractor is passing municipal threshold inspections and is in good standing with the local building department.
  • The inspector should be included on the routing of the third-party testing company to review material test reports and report on any performance measurements not meeting specifications.
  • The inspector should ensure that all stored materials are stocked in locations that are secure from theft and not in danger of being damaged by trades working onsite or by weather conditions.
  • Finally, the inspector should walk the entire site and document any construction concerns that deviate from the plans and specifications or represent shortcomings in the arena of construction best management practices.

While these items do not represent a full construction audit, they are measures that add to the overall quality control process for a project, further protect the lender’s interests and can help predict potential future budget shortfalls.

Assessing Contractor Efficiency

Building a construction project is a process, and like all processes that strive for a successful outcome, they must be performed in an efficient manner. The best indicators of an efficient construction project are the adherence to the project budget and schedule. These items are at the heart of a construction inspector’s report. However, there are other factors at a secondary level that can affect these measurements and should be included in the construction inspector’s review.

  • The construction inspector should evaluate the number of trades and manpower operating onsite to ensure the project is properly staffed for the current stage of construction. This information can be obtained by interviewing the contractor’s field personnel and reviewing manpower reports.
  • The inspector should also determine if the trade groups are being organized in a systematic fashion that promotes not only an efficient sequence of construction, but also project quality.
  • The inspector should also evaluate if materials are being delivered and staged at the site in a condition whereby laborers can access, transport and install them in a timely and efficient manner.

Safety and Security

The final components of a thorough site construction review are assessments of the safety and security of a construction project.The construction inspector should include a review of the safety process in their walkthrough inspection and report on the contractor’s safety requirements. The inspector should also note the presence of any unsafe work conditions or hazards.

Site security should also be assessed to ensure the improvements are secure from theft or malicious damage. Comments on the presence of security fencing, locking doors, off-hour guards and alarm systems should be part of an inspector’s consideration with respect to security measures at a job site.

How We Can Help

AKT Peerless’ staff of experienced Engineers and Environmental Professionals have established a high bar for providing innovative consulting services and practical solutions. We also offer a broad range of engineering services that assist developers and lenders through the due diligence process.

AKT Peerless can perform industry leading Construction Analysis (Cost and Plan) Reviews and Construction Progress Inspections as a part of our client’s loan administration process. The Construction Progress Inspection and Report includes not only a systematic review of the pay application, but additional information about the progress, quality and efficiency associated with a construction progress. At AKT Peerless, we know that our success depends on your success, so we strive to reach beyond the industry standards in our analysis and reporting, and to exceed our client’s expectations with every project.

Call us at 800-985-7633 to arrange a meeting – we’d appreciate an opportunity to show what we can do for you!

About the Author

Thomas M. Guist, PE is Vice President of Construction Services at AKT Peerless with more than 25 years of professional consulting experience. He is a Professional Engineer in multiple states and has spent his career working in the construction testing, geotechnical and environmental consulting fields. His areas of expertise include construction, property condition reports, and environmental due diligence, investigation and remediation throughout the Midwest and Southeast.

About AKT Peerless

We are environmental consultants and redevelopment experts who are proud to help build sustainable communities. Our services – environmental, sustainability, economic development incentives, and construction loan consulting – are tailored to the needs of each of our clients. We solve problems and deliver value to projects of any size, anywhere, and we empower our people to engage, at work and in our communities, to make a difference. We succeed because our clients and communities succeed. Call us at 800-985-7633 for help with practical solutions.

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