Construction Due Diligence: Red Flags for Startup Expansion

You wouldn’t make an investment without first doing your due diligence. Similarly, when you’re expanding a startup company, you need to do your construction due diligence upfront during the site selection process. Certain red flags, if left unidentified, can lead to unplanned costs down the road.

In most cases, hiring consultants can help you uncover many of these red flags over time, but partnering with a national design-builder during early due diligence can expose heavy-hitting risks with little upfront investment.

Here are a few red flags to look out for before spending money prematurely on your site:

1. Floodplains, Wetlands and Stormwater Management

Is your project-site-to-be within a floodplain or impacted by wetlands? If so, you are likely facing long regulatory reviews and uncertainty during permitting. Even if you make it past the red tape, compensatory storage for filling in a floodplain or wetland mitigation credits can add significant cost premiums.

If you’re not in a floodplain or wetlands, you’re not out of the woods yet. Stormwater management is another consideration that needs to be front of mind. Not allocating space for surface detention will lead to expensive underground storage.

2. Utility Infrastructure Availability

Is infrastructure available for water, sewage, power, natural gas and/or data at your site? And if so, is it adequate for your intended use? These are important questions to answer before finalizing your proforma, and the right partner can help you make these assessments before you get in over your head.

For stormwater and sewage, expensive scenarios could be insufficient gravity flow due to the existing topography of the site. To resolve this, you will need to  budget for a lift station– a costly installation with long-term maintenance obligations.

For power, natural gas and/or data, inaccessibility will require expensive utility extensions— just because the service is there, it doesn’t mean that there’s capacity to serve a new user.

3. Prior Site Development

A history of previous development on your site could indicate underlying pains such as undocumented fill and/or environmental contamination. In the case of undocumented fill, no geotechnical report will sign off on compaction that wasn’t witnessed by their firm. Being prepared for additional handling of material is vital to locking in your project’s costs.

If it’s environmental contamination you’re dealing with, expensive and time-consuming remediation will also need to run the approval course with designated EPA/DEP organizations before being greenlit for construction.

4. Regional Design Requirements

While regional design requirements are typically unavoidable within the same market, make sure you’re aware of the pros and cons that come with each. Most commonly, you will see at least one of the following from this list impacting your site, which will have significant implications on how you design your project and the related expenses:

• Seismic considerations (at varying levels, even in the same region)
• High winds (Coastal)
• Winter/snow loads
• Environmental or green building considerations (LEED or enhanced energy code requirements)

5. Climate Impact

Last but not least, don’t forget about Mother Nature. It’s no surprise that this unpredictable factor makes the list of red flags. Weather is an unescapable risk variable to any construction project, and it has limits to how well it can be controlled. Make sure you take careful consideration of how weather can impact your cost and schedule by asking questions like the following:

• Is my preferred location known for expansive soils (i.e. clay minerals that swell and shrink with water absorption, thus making an unstable foundation)?
• Will wet months impact my ability to complete sitework?
• What kind of soil stabilization techniques are available and what are their associated impacts on budget and schedule?
• If my region has brutally cold winters, what kind of winterproofing will be required to maintain my schedule and what are their associated costs?
• If my region is in an arid climate, have I accounted for adequate dust control?

Weather may seem like an obvious consideration, but it requires thorough analysis knowing that there is no one-size-fits-all solution to mitigate its risks.

Conclusion

Finding a site for your project is an exciting step, but be careful not to rush into committing too many upfront costs before releasing your due diligence. The last thing you want is to walk into a deal, only to find that the added costs to make your site construction-friendly breaks your proforma. Take the time to lean on trusted experts to help you uncover the expensive red flags, whether they be consultants or a national design-builder.

If you choose to work with a national design-builder such as ARCO, our goal is the same as yours: get to construction faster by uncovering expensive risks with minimal upfront investment.

Looking for the right design-build partner? Experience a better way to build: [email protected]