Preliminary Analysis - Standard

Inspections of construction projects are undertaken to mitigate inherent risks associated with project development and to establish the value of improvements in place. Inspections of proposed real estate projects may encompass pre-construction services such as plan review, cost analysis and construction document review to determine the quality and completeness of the plans and specifications, adequacy of committed funding sources, and reasonableness of the construction schedule.

General Information

An executive summary should be provided at the beginning of the pre-construction analysis report, which includes the following information:

Owner/Borrower Name
Project name and location
Description of the project
Statement of consultant's scope of work performed and assumptions made
Identification of Development Team

[Developer (if not the Owner/Borrower), Architect, Contractor, Engineers, etc.]

Overview and conclusions regarding Design, Documentation, Budget and Schedule of proposed construction. This section should summarize open items and areas that require additional research or documentation.

Scope of Review - Standard

The pre-construction analysis report should focus on these primary factors:

Design
Project Budget
Completion Schedule
Required Documents

The following list outlines several key areas that should be addressed in the pre-construction analysis report

INITIAL SITE VISIT. Comment on the status of construction progress on of off site, if any, and discussion of the monthly construction procedures
DEVELOPMENT TEAM. Provide detailed information about the development team, including firm name, contact name, mailing address, telephone numbers, fax numbers, email addresses and commentary on the qualifications and experience of these key participants.
COST EVALUATION based on a trade-by-trade quantity analysis, unless otherwise specified. Indicate if there are allowances in the scheduled values for trades and provide an opinion as to the adequacy of the allowances.
REVIEW DUE DILIGENCE REPORTS. Third-party reports will typically include geotechnical/soils and subsurface reports, hazards (seismic, flood, environmental, etc.) and other due diligence reports germane to the particular project. Consultant should comment on conclusions and recommendations made in these reports.
PLANS AND SPECIFICATIONS. The plan review will include evaluation of, among other things, architectural, structural, mechanical and electrical, HVAC and plumbing, fire safety drawings and relative code compliance. Conclusions should address completeness of plans and specifications, adequacy of operating systems, coordination of trades, and conformance with generally accepted design criteria. Any potential limitations on the intended use of the project based on the plans and specifications must be highlighted (e.g., poor access, inadequate parking, etc.)
ACCESSIBILITY. General conformance to the American with Disabilities Act (ADA) and applicable Fair Housing issues.
COMPLETION SCHEDULE. Identification of the contracted completion time and dates, including delay provisions ("acts of god" or "force majevre"), bonuses and penalties for accelerated or delayed completion. Conclusions should address reasonableness of completion schedule, coordination of trades, and identification of potential construction conditions that could impact achieving the proposed completion date (material shortages, off-site factors, long lead items, etc.)
CONSTRUCTION DOCUMENTS. Review the general contract and subcontracts for consistency with plans and specifications, budget sufficiency and status and coordination of trade buyouts. Include discussion of the type of contract, design-build components, contingency, allowances, retainage, stored materials provisions, payment and performance bonds, and the contracted payment cycle. Conclusions should address adequacy of the contracts, budget and timing, as well as identifying specific concerns or matters that would negatively affect the design, completion, cost and proposed date to put the project in service.
PERMITS AND REGULATIONS. The report should list all permits, variances, approvals and licenses that have been or need to be issued for the project during construction or to enable the intended usage of the property. Conclusions should address any staging or delays in issuing permits and commentary on variances or specific ordinances that may impact occupancy or use of the proposed property.
UTILITY AVAILABILITY. Review documents confirming available utility services and comment on the reliability of documents provided. The report should include a summary of each of the public or private companies providing service to the project, including contact information. Conclusions should indicate if specific utilities are not extended to the project or if additional work/separate expansion agreements are necessary to service the project.
ADDITIONAL WORK. The report should specifically address whether the general contract for the core and shell work includes tenant improvements; furniture, fixtures and equipment (FF&E); site work; and landscaping work. If not, then additional commentary on how these factors are addressed. If there are separate contracts, the report should include a complete analysis of the design, budget, documentation, timing and impact to the occupancy and use of the core and shell property.
REPLACEMENT RESERVE ANALYSIS. The pre-construction analysis report should include a 15-year analysis for the proposed project and recommendations of annual reserves required to make future capital improvements.
PROPERTY CONDITION ASSESSMENT. Consultants should include an evaluation of the existing property/structure(s) for projects identified as rehabilitation or renovation. This assessment should take into account the existing status of the property as well as the feasibility of the proposed improvements (including, but not limited to plans/specs, budget, appropriateness, completeness).

Comments and Conclusions

This pre-construction analysis report should include your opinion as to the following

conformance of plans and specifications to generally accepted building construction practices
compliance with governing codes and zoning regulations
adequacy of budgets submitted by Owner/Borrower/Developer
feasibility of construction schedule
recommendation regarding necessary annual Replacement Reserve required to make future capital improvements
conclusions about open items or concerns and the impact of these issues to the project in adequate detail for us to evaluate whether closing of the transaction should be effected

Reporting Requirements:

Oral Report

The consultant should notify the PNC designate by oral report if there are substantive concerns or if the requisite materials are not available to enable the consultant to complete the scope of service detailed above. If timing or material constraints prohibit delivery of the written report by the commissioned due date, the consultant must promptly notify REA or the PNC designate to determine how to proceed.

Written Report

Two written reports are required, unless otherwise specified. Additional copies of the report may be required for syndicated transactions or requested periodically by the Real Estate Administration contacts for quality control purposes. The written report should be delivered to the PNC designate (usually the Closing Administrator) within two to three weeks following the on-site visit. Comprehensive photographs of the project should be mounted, labeled and included with the written reports. A list of all documents reviewed should be included in the report and copies of third-party reports, general contracts (not subcontracts), utility letters, etc. should be attached. For plans and specifications, a comprehensive list of the drawings and the last revised date must be included. Electronic or compact disk delivery of the report, exhibits, and photographs may be provided in lieu of hard copies, provided that these are easily accessible and fully legible.

Special Instructions

Variations in the timing and content of the scope of this work and delivery of the report may be directed based on the specific project and financing needs. If this is determined prior to engagement, the specific terms and scope changes would be shown in the Bid Request under Special Instructions or by subsequent e-mail, fax or written communication.

Questions should be directed to Real Estate Administration.