Managing budgets for LTC building projects

When starting a new building project it’s important to understand that the earliest decisions on scope definition can have a profound effect on the budget, schedule and outcome of projects. While ultimate responsibility for putting all the pieces together rests with the owner, no one can expect executive managers of senior environments or even the extended staff to be experienced, highly trained experts in every phase of construction planning and execution.

Identifying a project manager, or owner’s representative, to lead the project team is becoming a vital factor in accomplishing an integrated approach to the LTC building process.


A well-qualified project manager must understand senior environments, be skilled at best practices of design, have solid experience with the construction type being undertaken and communicate well with project participants. In this capacity, the owner’s representative should understand where the most common budgetary problems occur and be ready to offer recommendations as process solutions. An outsourced project manager also must be proficient in construction specifications and establishing overall project budgets for senior developments.

The project manager is the gatekeeper of the schedule, cost control and quality. When it comes to cost, good management of the development process doesn’t just save money; it makes sure that the owner’s dollars are spent well. Quality built environments and programs matching resident and community current and future trend needs should be the goal of any senior organization. 

An early conceptual cost estimate sets a baseline and outlines all the cost implications of the program. Assumptions are established for direct construction costs, general conditions, allowances, building components, escalation factors, contingencies, insurance and bonding requirements and all other indirect costs associated with the project. 

Any development process is multidisciplinary: Balancing strategy, operations, finance, marketing, regulations, design and construction puts the owner in the best possible position to make informed and timely decisions.


Most agree that the best collaboration occurs when all disciplines work directly together. The integrated approach provides clear and direct communication between each team member. Once the right team is in place, it is imperative that the owner ensures that a decision-making structure is in place—how and when the team will meet and how those decisions will be conveyed and relayed to appropriate team members. Without a clear decision-making process, the professionals will not be able to do their jobs well. You need a team that has the authority and expedient timeframe to make educated decisions as planning and building progresses. Early involvement of various team members is crucial in materializing a building project in a cost effective manner.   

In a well-constructed decision-making process, the project manager is the guide and resource for all questions and issues that arise. The project manager assembles key members of the development team to identify major issues; collaborate on solutions, highlighting cost and time differentials; ensure cooperation among all key members and ultimately offers the owner several options, each associated with clear forms, revisions and directions to the team. The project manager is not just a funnel collecting the information, but facilitates a collaborative think-tank solution with the owner’s goals in mind.  


Functional programming of the proposed use can greatly dictate success or pitfalls with any renovation and/or new building project. Consequently, how wisely an eldercare provider organization defines the project scope and how well the team plans ahead will have a significant effect on the success of any construction project.

Considerations for project scope definition include evaluating energy and resource savings along with the life-cycle costs of the building. While first costs need to be in line with the project costs, building maintenance is a key consideration for owners. The initial construction cost accounts for fewer than ten percent of the total cost of owning a building over its useful life span. Sustainable design factors should be evaluated from the onset of planning and construction specifications made to reinforce project objectives, looking toward not only proposed building completion usage but future usage as well. 


Building cost modeling should be run from the onset of design; in this manner, first costs for various systems can be tested.  Direct linkage of design and building through system reviews allows owners to make informed decisions on various systems. The models create a platform to assess lifecycle and energy costs. 


Prior to commencing design efforts, a building program along with the proposed unit count and mix of the development is established and tested with the marketplace. As an owner’s building program is defined, it is measured against how to accomplish construction on an existing campus or green field site.  The planned built environment for senior environments should first and foremost respond to the prospective residents’ needs. The desired continuum of care program is directly linked to the current and future elder care consumer expectations. Those wants are materialized in the buildings which house the residential and care programs. 

The proposed use and functional program will ultimately dictate the building plans based upon the services being offered and the anticipated levels of care to be given. On average, the operating costs account for 80 percent of the total expenditures over a 30-year useful life of a building. Efficient staffing plans identified at the outset can reduce the anticipated full-time equivalents (FTEs) of the program.

The delivery of the construction project in a timely manner and allocating the use of funds to provide the appropriate built environment will enforce the mission of a provider organization.


The building process is cyclical. Planning begins followed by design, then preconstruction activities lead to construction and, ultimately, occupancy. Once residents move in, maintenance operations are ongoing for the useful life of the building. Infrastructure improvements occur over time and potentially are followed by additions/renovations, which take the process back to planning.No building process is without its imperfections; change orders are inevitable. If the planning process accounted for appropriate contingencies, allowances and escalation factors, change does not need to be a bad thing. Change orders can be a vehicle over the development timeline to enhance a project. A good project schedule allows time to make expedient, informed decisions to keep a project on track. 


Program management objectives include delivering a project on time and within budget. Every building project prioritizes three factors: schedule, cost and quality. Effective management moves a project along in a timely fashion. Total project costs are managed through programming, continuing with value engineering, then concluding with reviews of Potential Change Orders (PCOs).

PCOs are categorized as: unforeseen conditions—changes due to hidden conditions; code interpretation—governing authority changes an interpretation; program changes—owner-directed changes; errors and omissions—changes from any survey, record documents, program communication, site investigation or coordination of disciplines; and miscellaneous—changes due to weather delay, natural disaster, accident, commodities cost, labor strike, etc.

When a PCO comes up during a building project, the building team must know the right questions to ask and have a process in place to evaluate them. The level of quality must respond to market expectations and pricing, as well as long-term operations. 

If a building team understands how change orders can affect the project, it can anticipate alternatives and establish contingencies into the budget and schedule, keeping the process on track from vision to occupancy.


Best practices in any budgeting methodology include the following steps:

  • Establish team goals, expectations and expertise.
  • Include specific goals in the project program.
  • Align budget with program.
  • Consider sustainability as a priority. How you reach that goal depends on how you define “green.”
  • Generate a cost model for the project.
  • Identify funds necessary for building initiatives.
  • Address limitations in the budget at the programming stage.
  • Define financing requirements during the planning phase of development.

The owner will have completed market studies, operational impact analysis and financial feasibility on his or her own or through an owner’s representative. The development plan then responds to the existing facilities and/or property. The project manager will run construction cost estimates at the completion of various design phase milestones to assign values to the defined project budget and also monitor assumptions made conceptually during planning against the schedule.


The development timeline identifies milestones of planning and, later, implementation; it’s a road map to guide the process. A project plan must include strategies to managing the budget along a long development timeline that balances capital costs and construction escalation. Team members coordinate efforts throughout the process and ensure knowledgeable decisions are being made. Communication is the most important factor to a successful, on budget, building project. 

Frank R. Muraca, Presidentof ARCH Consultants, ltd., is a licensed architect and a member of the American Institute of Architects. His professional associations include LeadingAge, United States Green Building Council and the Construction Specifications Institute. He also serves on the Senior Housing Council of the Urban Land Institute. For more information email

Topics: Articles , Design , Leadership