Category: Construction Audit & Advisory Services

HPM Hosts Second Annual Georgia Education Executives Summit

April 24-26, executive leaders in Georgia education gathered for HPM‘s Second Annual Summit. School districts from across the state were represented at the event held in Adairsville. The Summit is a premier event designed to connect leaders in the K-12 industry to create unique strategies for navigating common challenges. Speakers included national experts in financing, staffing, planning and international business. Presenters shared insights on optimizing learning environments for students while maximizing facility lifespans.

About the Program

Featured keynote speakers included Cheryl Logan, Executive Director at the University of Pennsylvania and Casey Morris, Senior Director of Capital Planning at Ameresco. HPM’s Chris AlleeMegan Whitten Cordingly, Greg Ellis, Jake Ortego and Tracy Richter also shared best practices for navigating successful capital improvement programs. Each session was designed to foster a conversational, interactive environment to build connectivity among participants.

In a particularly insightful session highlighting program controls, attendees took an in-depth look at cutting-edge technology designed to empower leaders to make more informed decisions and better communicate with internal and external stakeholders. Embracing the digital world is paramount to achieving a successful program. Guests were also offered an approach to facility condition assessments that breaks the cyclical nature of facility planning. When implemented, this strategy enables K-12 leaders to create actionable, defensible and sustainable capital plans resulting in predictable outcomes.

The Summit’s closing session provided information on the role of educational facility standards in the development of an effective long-range facilities plan. These standards play a critical role in shaping the curriculum. Furthermore, they can be utilized to inform new construction, renovation and modernization, ultimately serving as a tool to generate improved educational performance.

“I was extremely satisfied with the quality of the content provided at The Summit,” said an attendee. “The Setting the Standard session brought everything together and was tremendously applicable. I am very likely to attend the event again and recommend that my peers in Georgia education do the same.”

Why HPM?

HPM partners with K-12 school districts to create and implement data-driven long-range planning initiatives. This team of seasoned planning professionals is comprised of former educators turned facilities conditions and assessment experts. They frequently teach the essential practice of integrated planning into capital improvement programs. HPM’s continuous planning practices consistently yield efficiencies and savings to K-12 clients. In turn, every dollar within a bond program is utilized to its full potential. Learn more about HPM’s extensive resume managing large-scale programs on behalf of K12 school districts.

AAR Breaks Ground on MRO Expansion at Miami International Airport

AAR CORP., a leading provider of aviation services, MROs and OEMs based out of Wood Dale, Ill., hosted a groundbreaking ceremony in Miami, Fla. on March 27th. The new MRO facility will be located next to AAR’s current hangar at Miami International Airport. With 114,000 square feet of additional space, AAR’s maintenance capacity is slated to increase by 33%. The three-bay facility will create more than 200 new jobs in the Miami area.

More than 400 guests attended the celebration commemorating the start of construction. Attendees included AAR’s Chairman, President and CEO, John M. Holmes, United Airlines‘ Vice President of Tech Ops- Heavy Maintenance, James Crane, Miami International Airport Director and CEO, Ralph Cutié and Miami-Dade County Mayor, Danielle Levine Cava.

“The construction of this facility is an important step in AAR’s growth strategy that enables us to best serve our valued customers.”, said Holmes. “We are enthusiastic that our expansion in Miami will create career opportunities and continue to strengthen the aviation industry in South Florida.”

HPM is providing planning services for the project, along with lease negotiation services and coordination with the Miami-Dade Aviation Department. HPM’s support enables AAR to focus on the maintenance of the 40-ton aircraft coming through its bays. With an extensive portfolio of aviation industry experience, HPM is uniquely qualified to position AAR for success in this growth endeavor, expected to be fully operational by October 2025.

AAR independently provides services to commercial and government customers worldwide. Operating worldwide for almost 70 years, AAR has established itself as a trusted global leader. The company is best known for strategic warehousing, parts supply and repair & engineering.

Are Claimed Weather Delays Correct?

Weather Delays

As owners’ representatives, HPM is often asked to evaluate the validity of claims for additional days due to weather delays. Typically, the owner’s entire team is able to play a significant role in the review process. Together, we can understand the requirements for an extension.

There are typically three main requirements for the construction manager to make an extension claim citing weather delays.

  1. They must notify the owner in a timely manner.
  2. The weather must be abnormal and, therefore, not predictable.
  3. The impacted work must be relevant to the critical path.

 

While each contract may vary, the requirements of the AIA 201 contract serves as a good base example.

Notification

AIA 201, section 15.1.3.1 determines the time frame as to when the request must be given to the owner. Claims by either party under Section 15.1.3.1 shall be initiated within 21 days after the occurrence of the event in question, or within 21 days after the claimant first recognizes the condition in question– whichever is later. Per the contract, the owner is responsible only for claims submitted within 21 days of the conditions. Please note, this paragraph states that the Construction Manager must notify the owner of a claim, not simply a notice of a weather event.

Abnormal Weather 

The stipulation is not if the weather impacted the work, but, if the weather was abnormal. AIA 201 Section 15.1.6.2 states, “If adverse weather conditions are the basis for a claim for additional time, such claim shall be documented by data substantiating that weather conditions were abnormal for the period of time, could not have been reasonably anticipated…”. In this sentence, you may rightfully focus on how to determine if the weather conditions were abnormal. It is also important to focus on the question of the correct “period of time”.

Related to the “period of time”, it is most logical to assume a weather event that disrupted a concrete pour would be the total scheduled time related to pouring concrete. This may be one and a half months, or it could be four months, but it is not specific to a calendar month (like just the weather impact in July). Related to any review of abnormal weather, one must have a basis for “normal”. The National Oceanic and Atmospheric Administration (NOAA) is the most common guide for this review.

Critical Path

AIA 201 15.1.6.2 states, “if adverse weather conditions are the basis for a claim for additional time, such claim shall be documented by data substantiating that weather conditions were abnormal for the period of time…and had an adverse effect on the scheduled construction.” You often hear the analysis of a delay as an analysis of the critical path. The critical path is the required sequence of work necessary to complete the project in the shortest possible time. While the analysis of the possible adverse effect of weather on the scheduled construction is a requirement, it may not be necessary to perform such an analysis if the other hurdles have not been met, namely, timely notice and proving the weather was abnormal.

Lump Sum General Contractors… Yes or No?

When contracting for construction utilizing the CMAR approach most owners ask themselves if agreeing to a lump sum for general conditions type cost is the best contracting method. While there is not one answer to all questions, there should be a discussion of the pros and cons associated with payment plans for general conditions type costs.

Where to Start…

A great place to start is analyzing the reasons for selecting a fixed amount for GCs in the first place. Are these types of costs difficult to review, in that there are many small expenses? Are some of these costs difficult to understand, such as payroll burden and insurance? Might some of these costs, such as supervision and management, be subjective? Are we trying to eliminate the need to evaluate subjectivity?

Secondly, if we are going to specify a fixed amount for GCs, we must define General Conditions. Defining anything labeled as “General” takes work and specificity in order to ensure understanding.

Because there is no one “correct” approach, the question should not be binary (yes or no). There is a third option, Not to Exceed (NTE). NTE can be a good option in that the sum cannot be higher than, but could be less than, and can also be reviewed or audited if needed.

Factors to Consider

Without writing a dissertation on each of these points, it is important to consider problems that might arise from the lump sum GC’s method, along with other relevant factors.

Sure, invoices take time to review, and GC’s costs come with a lot of invoices. However, in some cases, not all invoices must be reviewed. Having the ability to review, but not the requirement, may be helpful.

Getting the lowest GC’s bid is occasionally a good thing, but having the best CM supervision is almost always a good thing. How many projects have gone awry because of excessive supervision or overly qualified personnel? A low bid for GCs (at least 50% complete supervision and management) positively correlates to less supervision and less experienced personnel. Incentivizing less supervision and experience is not our goal, but it may be the result.

There can be a case for certain types of GC’s costs being subjective. Mostly, off-site vs. on-site persons as reimbursable. This can be mitigated by making the dividing line clear in your contract and including that contract in your RFP.

In addition to the possible misaligned goals of the owner and CM with low bid GCs, another result of an LS GC’s approach could be a CM shifting GC’s type costs to the Cost of Work, either in a subcontract or in self-performed work.

Transparency is Key

Lastly, what starts as fixed, doesn’t always remain fixed. Having full transparency to actual costs when a claim for additional GCs arises might be helpful.

When we have these discussions (which are quite frequent), we agree with the CM that the Lump Sum is not adjustable. This, however, does not mean that it is not auditable. Also, just because the CM (at the moment) might think that certain costs are not reimbursable doesn’t mean that they are not project-related records that are auditable by the Owner’s accountants.

Why Does this Matter?

You may ask, “Why do we care, as long as we are not being charged any more than we agreed to and if they aren’t going to bill us that cost?” There are many reasons, including:

Credits related to the reimbursable Cost of Work may be miscoded to the LS or not reimbursable job cost (accidentally, of course), thereby inflating the Cost of Work.

Costs that are to be apportioned to the lump sum and to the reimbursable cost may only be charged to the reimbursable cost (again, an oversight). Having access to all the cost records would make such errors easy to spot (Dumpsters for demo work vs. dumpsters for new construction trash, where demo work is being self-performed on a lump sum basis).

Costs that are charged to non-reimbursable may point to other errors, like consultants being billed as employees (at fixed labor rates), or rental equipment from third parties being charged as if it were owned by the CM.

Illegal expenditures may be hidden in LS or non-reimbursable job costs.

As you are contemplating the above, also contemplate that well over 50% of the time, a review of the project records designated by the CM to be LS or not reimbursable indicates that credits are owed to reimbursable Cost of Work that would have not been discovered otherwise.

K12 School District Leaders Attend HPM’s Executives Summit

HPM recently hosted the inaugural HPM Texas Education Executives Summit, a premiere event connecting executive leaders in K12 school districts to create unique strategies for navigating common challenges. The Summit, held November 1-3, 2023 at The JL Bar Ranch, provided the perfect backdrop for an elevated networking and educational experience. Leaders representing seven districts across the state were in attendance, along with national experts in finance, facilities planning, contract management/auditing and other fields impacting the K12 industry.

About the Event

Attendees gleaned valuable insight on approaches for successful bond planning and execution. Topics included strategies for maximizing bond dollars through comprehensive Planning, best practices for navigating bond elections, tips for developing and maintaining a master schedule. As a highlight, HPM President, Ryan Austin and Senior Vice President of Program Development, Greg Ellis led a discussion on capital program success, offering strategies for managing multiple contractors, efficient program controls strategies, managing delays such as materials availability, change orders and contract disputes. Most importantly, sessions were robust, reality based and designed to foster conversation.

The Summit concluded with a round table discussion of open-ended topics benefiting all attendees with a focus on methods for overcoming operational challenges. Outcomes of the discussion provided thought provoking ideas for participants to take back to their districts, as well as a framework for future Summit topics.

Why HPM?

HPM partners with K12 school districts to create and implement data-driven long range planning initiatives. This team of seasoned planning professionals is comprised of former educators turned facilities conditions and assessment experts. They frequently teach the essential practice of integrated planning into capital improvement programs. HPM’s continuous planning practices consistently yield efficiencies and savings to K-12 clients. In turn, every dollar within a bond program is utilized to its full potential. Learn more about HPM’s extensive resume managing large scale programs on behalf of K12 school districts.

Cost Segregation: Increase Cash Flow and Maximize Investment Potential

Engineers Specializing in the Niche Service Offering of Cost Segregation

At the center of HPM lies a clear and simple mission: acting in the best interest of the owners we represent at all times, so that they might maximize the productivity and profitability of their entity. Underneath this broad umbrella lie numerous service offerings providing owners with practical steps to accomplish their goals. The Audit & Contract Services group within HPM are experts not only in construction but also in the world of finance and accounting. These professionals are able to save millions of dollars on behalf of their clients by applying this unique combination of skills and industry knowledge. Within the Audit & Contract Services group are engineers specializing in the crucial service offering of Cost Segregation.

Maximizing Cash Flow

Cost segregation is a powerful tool in reducing taxes and producing additional cash flow in the early years of property ownership, enabling assets that depreciate more quickly to be separated from the standard depreciation schedule for the property. Within today’s volatile market, many property owners are wishing they had known about cost segregation sooner. For those who have acquired, remodeled, or built a piece of property this year, a cost segregation study is the best way to reduce taxable income and increase your cash flow sooner by identifying components of a project that are eligible for faster tax depreciation.

Bonus Depreciation

Cost Segregation becomes all the more powerful when taking into account bonus depreciation, which is being phased out slowly over the next four years. According to the IRS, some properties qualify for bonus depreciation, which is an additional five-year depreciation and allows these property owners to deduct a specified percentage (usually 30%, 50% or 100%) in the same year the property is placed in service. Customers should take advantage of this extra benefit on top of Cost Segregation while it is still around, as it will start to see a 20% reduction beginning this year.

Choose Your Team Wisely

Due to the many complexities and nuances that accompany Cost Segregation, it is imperative that you choose a partner with an engineering background. Cost Segregation is more of an engineering function than an accounting function, and this is proving to be true as the pool of companies offering Cost Segregation services has become more saturated. The IRS is starting to weigh the validity of firms that utilize an engineering approach over those that take an accounting approach, as it takes a true engineering knowledge of building components to segregate the asset correctly. A firm may claim to abide by IRS guidelines, but it takes specialized experience to accurately understand this. Any study done without this substantial background knowledge could potentially be thrown out or leave money on the table.

Bottom line — if you are thinking about utilizing a Cost Segregation study, consider partnering with HPM and benefitting from our team’s significant experience carrying out these practices. The rewards may be even greater than you think.

HPM Bolsters Presence in Key Markets with Round of Strategic Hires

Following a year of growth, Antonio Fratangelo, Jake Ortego and Jalal Slade to significantly broaden the firm’s offerings across several service lines.


We are pleased to announce the hiring of industry veterans Antonio Fratangelo and Jake Ortego as principals in the audit and contract services division and Jalal Slade as director of program development. Working alongside HPM Vice President of Audit and Contract Services Vinson Chapman, Fratangelo and Ortego aim to expand the division’s capabilities and service offerings for clients while expanding the firm’s geographic reach. Slade works to broaden the firm’s presence in the Metro Atlanta market, providing strategic leadership while cultivating new client engagements and strengthening existing partnerships.

Jake Ortego, Principal, HPM Audit and Contract Services

Natives of Pittsburgh, Fratangelo and Ortego join the firm with a combined 45 years of experience in audit, engineering and construction project management. Throughout their careers, they have led both design and audit teams on real estate and construction projects totaling more than $2 billion. In 2014, they co-founded JA Cost Engineers and Advisors, an advisory agency providing construction auditing, management consulting, risk management and additional services for construction, development and capital improvement projects.

Antonio Fratangelo, Principal, HPM Audit and Contract Services

“Our combined passions for construction and backgrounds in engineering have equipped Antonio and me with the unique skill sets needed to assist clients along every step of a project timeline,” said Ortego. “Antonio and I have worked together for the majority of our professional careers, establishing a proven process that became the core of our firm. We look forward to bringing this shared expertise to HPM and expanding our abilities to offer a wider range of services on a larger scale.”

Fratangelo and Ortego will join the team led by Chapman, who began HPM’s audit and contract services division six years ago. Chapman previously worked with Fratangelo and Ortego on a high-profile project totaling $4B for a large tech company.

“When I knew the client needed our assistance with this massive project, Jake and Antonio are the experts I immediately turned to in order to help get the job done,” said Chapman. “They are well respected within the construction audit and cost control industry and possess a range of knowledge highly beneficial for program management. Their capabilities are exactly what HPM needs to round out our continuum of services from program development to project management and beyond.”

Jalal Slade, HPM Director of Program Development

The firm also hired Slade as director of program development in HPM’s Atlanta office, set to lead program and business development initiatives in the market. Slade has an extensive background in municipal and aviation projects within Atlanta, having previously served as assistant general manager of the Hartsfield-Jackson International Airport, where he oversaw the construction and delivery of an $8 billion capital improvement plan. He also worked as senior policy advisor for the Office of the Mayor, providing oversight and management for the city’s real estate asset holdings. He works to align HPM’s internal goals with its clients’ goals, offering leadership and expertise for project teams across all of the firm’s industry verticals. He also aims to build on HPM’s existing client relationships while forging new connections within the market.

“Heading into 2022, we look back on a year of immense growth for our firm,” said Ryan Austin, president of HPM. “With the additions of Jake, Antonio and Jalal, I am confident we are continuing this positive trajectory with the best possible team leading the way. This is an impressive group of people with a number of diverse, large-scale projects under their belts, and our firm is in good hands as we look to even more success in the new year.”


We’ve been named one of the Best Medium-Sized Companies to Work For in America by Great Places to Work multiple years running. Interested in joining our team? Learn more by clicking the button below.

Should You Consider a Specialist for Your Construction Audit?

By Vinson Chapman, Vice President, Construction Audit & Advisory Services

Auditing construction contracts can be complex. The expertise involved is significantly different than typical audits performed by CPAs and involves evaluating subjective estimates, identifying ambiguous terms of the contract, and noting contractual incentives where the owner’s and the general contractor’s interests may not be aligned. A construction audit also requires obtaining and evaluating all the appropriate evidence to support the audit findings. This is not legal work or work performed by an architect.

A detailed analytical review of completed contracts and contracts in progress will provide meaningful information and focus on potential problem areas. Our Construction Audit & Advisory Services combine the skills of owner’s advocate, owner’s representative, program manager, and construction auditor.

Case Study Example

In the case of one independent K-12 school district in northeast Texas, the review of an extension of time by the general contractor/CM and a general financial audit required the expertise of HPM’s hybrid Contract Services, which included both project management and audit expertise.

When the GC/CM fell behind on schedule, their default was to request additional time through weather delays in order to avoid liquidated damages and redirect attention to the reality of the problem areas.

The project management audit review of the contract language and the potential weather impact on the critical path of the schedule resulted in the following:

  1. The contractor did not provide the required documentation during construction for their intent to make a claim for more time per the contract.
  2. The contractor did not provide evidence that there were abnormal (greater than average rain days) periods of weather. This data is measurable and a typical required deliverable in a change order request by the GC/CM.
  3. The contractor’s critical path schedule was not affected by any claimed abnormal weather after review of the installation of work.

Project management issues were the reason behind a significant portion of the Contract Services Audit resulting in a credit back to the school district from the General Contractor/CM. Additional monies were recovered from the financial audit resulting in a total of over 5% of the construction contract value being returned to the district.

This example is somewhat typical of our standard audit findings of between 1% and 5% of the contract value. Obviously, savings of this type are well in excess of the fee to perform these hybrid services. The expertise for these services was not available from the district’s attorney or architect, and without the added HPM support, the district couldn’t defend the GC/CM’s requests. Our specialized knowledge and experience made it possible.


HPM provides peace of mind and confidence you paid the right price for your construction spend.

HPM’s audit service professionals offer expertise to secure fair negotiation and billing for client contracts. We perform comprehensive reviews of job costs that often lead to a substantial net savings of project costs. As always, if we can be of service, please do not hesitate to reach out. Click the button below to be directed to our page.

 

HPM Talks Webinar: GMP Contract Negotiations: Recognizing and Understanding Potential Conflicts of Interest

In this HPM Talks, Vince Chapman, Vice President of Audit and Contract Services, talks about GMP Contract Negotiations: Recognizing and Understanding Potential Conflicts of Interest.

As an owner, when you are negotiating the terms of a Guaranteed Maximum Price contract with a construction manager or general contractor, you need to be aware of the CM/GC’s conflicts of interest. Vince examined these hidden conflicts and discusses possible solutions to these issues.

This talk focuses on conflicts due to:

  • – CCIP: Contractor Controlled Insurance Programs
  • – SDI: Subcontractor Default Insurance
  • – Self-Performed Work

Each of these above items has built in conflicts of interest for a CM/GC being completely transparent about the additional enhanced CM/GC fee potential. Understanding the nature of each and the various situations that may arise is key in allowing the owner to make a good decision and to negotiate the best GMP contract possible.


Speakers:

Vince Chapman
Vice President, Audit & Contract Services, HPM

Vince provides 100 construction audits a year for industry leaders such as Google, FedEx, Hewlett-Packard, Caesar Entertainment, Sutter Health, Genentech, Southwest Airlines and NVidia. He provides services to virtually all industry segments such as K12 education, healthcare, hospitality, sports, airlines, pharmaceuticals, higher education, oil and gas, high-rise residential and office/retail development. In the last 30 years, Vince has managed thousands of construction audits from Canada to Mexico, the Caribbean, Europe, Africa, and in virtually every major city in the continental USA.

HPM Rises to Top 25 on ENR’S Program Management Firm List

Unique standard of personal client care and the hiring of top-level talent moves HPM up 20 spots.

HPM made the top 50 on Engineering News Record’s (ENR) program management firms list for the fifth year in a row, but even more exciting is the jump we made in the ranking. HPM rose from number 42 to 22, and while we are certainly proud of this success, we recognize that it was not built overnight.

HPM’s team members located across the U.S. made this happen by building on the strategic efforts of the last five years. We have restructured our organization for success, growth, and versatility — ensuring that the best people are available to each client.

There are several strategic moves we’ve made to build this company on the service and expertise as owners’ advocates and representatives.  About six years ago, HPM acquired the audit and contract services firm of Vince Chapman. He and his team provide a comprehensive approach to new and existing clients, serving all aspects of their needs for construction cost auditing and com­pliance services.

Greg Ellis began building a program development division based on a solid preconstruction team led by Del Buck – who in turn surrounded himself with an army of experts in estimating and scheduling as well as in subspecialties. Greg also has established a team of program development managers who provide the necessary bridge for clients who are considering capital expenditure programs and guiding them on how to define and initiate those programs. HPM moved even further left by hiring facilities planning expert and respected industry veteran Tracy Richter to lead the firm’s new Planning Services division, a move that bolsters and expands our service offerings while extending relationships with clients representing more than a dozen industries.

Last but certainly not least, we have redefined our business development and marketing strategies to be laser-focused while remaining nimble and adept at our pursuits into new industries and markets. We’ve continued to explore new ways to diversify our portfolio of clients and optimize our expanded services.

We are honored by this great recognition as being one of the top program management companies in the U.S.

“We are so appreciative that our clients continue to trust us to represent them by leading their capital building programs,” said HPM President Mike Lanier. “This recognition highlights the outstanding performance and effort of our employees across the country.”

Ready to discuss your next project?