In cultivation facility construction, the primary goal of the ownership group can usually be summed up in five words: on time and on budget. Unfortunately, the reality rarely squares up with the goal. Design and construction teams with significant experience in cultivation facility projects usually produce the best results, but often ownership teams lack deep experience, which results in unpleasant surprises in the form of budget overruns and construction delays.
Sometimes, construction delays and budget overruns are a result of less than reasonable expectations by the ownership group whose early stage projections may be overly optimistic. There are always variables influencing the project timeline and costs that can be impossible to plan for, so its important to write contingencies into the schedule and the budget. However, with careful planning, thoughtful budgeting, and patience during the design stages, the potential for construction delays and overruns is greatly reduced, and the odds of achieving the Holy Grail of facility construction—an on time, on budget project—are greatly improved.
Read on for information on some of the most common issues that contribute to time or budget overruns, and what you can do to avoid them.
1. REAL ESTATE SELECTION
We can’t tell you how many projects we’ve seen fall apart due to issues related to real estate selection. A certain piece of property may seem to be perfect, so the investor pulls the trigger without doing sufficient due diligence. From zoning or conditional use permits, to utilities, to new rules by the municipality, or landlord disputes in rental properties, real estate selection is a key component to ensuring that money and time are not wasted.
We’ve seen clients purchase properties only to have zoning requirements change before construction starts, issues with the utility’s ability to bring in power causing years-long delays, changes to fire sprinkler requirements causing hundreds of thousands in budget overruns, and disputes with landlords around tenant improvement plans causing months of delays and hundreds of thousands of dollars in wasted rent payments.
When considering the purchase of a new property, take the time to fully research the property to ensure that it will be right for your needs. Review proposed zoning law changes that might affect the future use of the building. Engage with experienced engineering firms to understand power upgrade requirements and with the utility companies to understand estimated costs and timing associated with those upgrades. Review fire codes for the location, and ensure that in any rental agreement, the respective parties’ expectations around tenant improvements are clearly spelled out and well understood.
2. CHANGE ORDERS
Ah yes, the dreaded change order. While the construction trades may certainly appreciate the additional work associated with midstream change orders, facility owners often hate them just as much because they tend to throw everyone off schedule. The results of what feels like a minor change order can have far-reaching effects and cause several construction delays.
A minor floor plan change can have structural implications. A lighting change can have electrical, HVAC and irrigation implications. Changes to media or irrigation strategies can impact HVAC and waste-water systems. Change orders aren’t only related to design decisions but can also be required due to failing to adequately plan for scheduling. For instance, we’ve seen clients make changes to certain equipment selections due to underestimating lead times, which resulted in the need to completely redo electrical installation that had already been complete based on the previous selections.
Of course, change orders during large construction projects are inevitable to some extent. But they can be significantly reduced by taking the time to make as many cultivation decisions and technology selections as possible during the design phase, build manufacturing lead times into the construction schedule, and avoid deviating from those design selections as much as possible.
Budgeting should be done in two stages: pre-design, when overall facility design options are being considered and compared, and post-design, when final plans are complete and specific prices can be established. The more accurate pre-design budgeting is, the more effective the fundraising efforts, which results in the entire project kicking off on the right foot and limits the potential for fund-related delays in construction.
Relying on “per square foot (SF)” estimates or experience with previous facilities isn’t particularly accurate. “Per SF” estimating fails to take into account specific technology decisions and how those factor in to the final price. For instance, single tier cultivation vs. multi-tier cultivation, LED lighting vs. HID lighting, and HVACD system selections (among other things) can all create substantial variations in cost for the same square footage.
Relying on previous experience with cultivation facilities fails to consider the increases in cost of building materials over time, improvements in technologies that you’ll likely apply in future facilities and differences in labor rates in various geographies. Your best bet is to work with experienced design teams like Surna to assist with budgeting, starting in the pre-design early planning phases.
4. ENGINEERING COORDINATION
During the design phase, while each engineer is an expert in his or her own specific discipline, they’ll be relying on information from other disciplines to ensure that their own designs are accurate and reflect all of the important components of the facility.
The architect will need to understand how much space in the floor plan the electrical and mechanical designs will require. The electrical engineer needs to know all the details about each piece of equipment in use at the facility and contribute to the decision making process around certain selections that may be available in multiple supply voltages. The mechanical engineer needs to know what the irrigation designer is planning for water volume. The structural engineer needs to know what equipment will be roof or ceiling mounted. The plumbing engineer needs to understand supply requirements and waste-water volume from reverse osmosis (RO) and irrigation systems. These coordination items are just a small example of the vast amount of coordination that’s required between disciplines to ensure that everyone involved is sharing information and properly accounting for the design elements that may be included by other design disciplines.
This coordination is also important to identify areas where there may be scope gap. For instance, your controls contractor may be controlling the distribution of CO2 to each room, but who is designing the CO2 piping? Who is managing the design of the emergency evacuation system if required? Are all these elements accounted for in the design and budget?
To ensure coordination to minimize delays, scope gaps, and cost overruns, a cultivator’s best bet is to choose to work with design teams who have significant experience in cultivation facility construction. Furthermore, frequent design coordination meetings are an absolute must, where the team convenes to review design progress for the various design disciplines.
5. CONTRACTOR EXPERIENCE
Selection of contractors, both general and sub, will have a huge impact on the time and budget goals of a new cultivation facility. Often, clients make contractor decisions based solely on cost. While there are many exceptionally competent contractors who will take on these projects at a fair price, making the decision about who to work with based on cost alone is rarely a recipe for success.
Cannabis cultivation facilities are unlike any other construction undertaking. The density of mechanical and electrical in particular, combined with the systems and fixtures that support the cultivation process, makes staging of the various trades involved in facility construction absolutely vital.
Contractors must be very skilled at estimating time to complete specific tasks. It is their duty to rotate the various trades in and out of different areas of the facility to ensure they aren’t getting in each other’s way. Many of the subcontractors’ tasks must take place in a particular sequence, and contractors must be absolutely masterful in scheduling trades in each area of the facility, and determining what can be done in parallel versus what must be done in sequence in order to stay on track.
While everyone involved in cultivation facility construction should be prepared to expect the unexpected, with the right mix of planning and partner selection, cultivators can position themselves to avoid overruns and costly construction delays.