Case Study
Construction and Real Estate Advisory Services: Controlling Construction Costs for a High-Rise Building Project
The Client
One of the largest insurance corporations in America was about to begin constructing a new $200 million, 32-story headquarters building.
The Challenge
The company’s internal audit department personnel were experts in evaluating life and health insurance claims, but understood when it came to monitoring and controlling construction costs, they needed help in identifying and managing the risks involved in this large, complex project.
Our Solution
McGladrey’s Construction and Real Estate Advisory Services group assembled a cross-functional team that included a CPA with extensive contractor audit experience and a professional engineer with extensive hands-on construction management experience. Working closely with the client, the team reviewed the construction contract documents and identified two areas posing the greatest risk to project cost overruns: overhead and indirect charges billed at actual cost by the general contractor and developer; and a workers’ compensation insurance program which depended on an accurate record of labor hours worked on site.
To identify cost overruns efficiently and effectively, the team developed a cost certification program that included:
- Reviewing the job’s physical and financial status with audit department personnel and the construction management team
- Examining invoices submitted by the general contractor and developer for indirect and overhead costs and evaluating charges for accuracy
- Researching and resolving questionable charges with the contractor and developer
- Reviewing workers’ compensation premiums for accurate labor hour records and rates
Client Benefits
Multiple issues were identified and dealt with quickly and easily before they escalated. And the client had confidence that their goals were being met and their costs contained. Two years later the company moved into its new headquarters building a month ahead of schedule and free of cost overruns.
To learn more about our Construction and Real Estate Advisory Services, contact John Lincoln, Director, at 312.634.3199 or john.lincoln@mcgladrey.com.
