Renovating the Renovation Process

Berkshire Property Advisors uses a new software application to manage renovations and capital improvements – gaining visibility, knowledge and control while reducing costs.

Like a lot of property management companies, Berkshire Property Advisors found itself using a combination of spreadsheets, disparate databases and paper-based processes to manage renovation and capital projects. But they knew they could do better.

“Excel spreadsheets, access databases and paper trapped in physical PCs are antiquated tools for managing multi-million dollar renovation projects,” says Zachary Maggart, vice president of redevelopment for Berkshire. “We used an Access database exclusively, yet we knew something had to change.”

For years, during a healthy market, the main problem had been finding contractors to handle projects. Cost control and administrative efficiency was secondary to the contractors’ bandwidths: how much could they handle, and how quickly? The company at one point was using 30 different contractors around the country.

Then came the economic downturn, and Berkshire shuttered 40 redevelopment projects budgeted at $100 million.

Now, with rents on the rise again, the ROI on rehab projects is back in the spotlight. Value added improvements combined with deferred maintenance requirements have taken the wraps off projects.

But this time, things will be different.

Market Retreats - But Technology Advances

“During those years when our rehab projects were idle, technology in the apartment industry continued to rocket ahead,” says Maggart. “There were amazing new solutions in all sorts of areas for driving cost savings, more efficient processes and workflow, you name it.”

Inspired by these advances, back in 2008 Berkshire teamed with RealPage’s OpsTechnology division to develop and beta a state-of-the-art solution for replacing the old spreadsheet-and-paper management of construction projects. In concept, it would streamline the management of projects all the way from initial bid requests, contract and transaction management through to project completion, while driving costs savings along the way.

“There were a host of shortcomings with the old way of doing things,” explains Maggart. “You had decentralized processes, which compromised control, security and visibility into what was happening. You had manual approvals, which are non-standard and hard to audit. Bid management and project visibility were limited to the job sites. And you had multiple people working out of the same budget – a formula for confusion. And while we had a system to gather and centralize data exports on a daily basis, the information wasn’t real time and there was no integration into our accounting system.

“With lack of real time information and a lack of centralized control, budget tracking, document retrieval and cost control were difficult and time-consuming – the workflow was really inefficient.

“And on top of all this, working with suppliers was a mess. It was mostly paper-based, and paper resides in just one location. It’s hard to access. You also didn’t have an easy way to solicit bids from a large, dispersed group of contractors and vendors in search of the best price.”

Maggart adds that higher-level management suffered from very limited visibility into the projects, compromising their ability to monitor budgets and efficiency, and spot problems. We were spending hours, and in some cases days consolidating information for our owners, asset managers, and leadership.

OpsBid to the Rescue

The joint effort between Berkshire and RealPage resulted in the creation of OpsBid, implemented at Berkshire in 2009 and released to the multifamily industry as a whole at the RealWorld Conference in Las Vegas in July of 2011. It was billed as the industry’s first on-demand project management solution developed for multifamily renovations and capital improvements.

“OpsBid helps you manage projects from start to finish,” says Maggart. “From budget by job or property, to bidding, to contracts, to financial transactions and lien waivers, everything is right there. And it’s all web-based, so there is anytime, anywhere access to the information, subject to user permissions of course. Everyone has access to all the information they need, all the time. It’s a single copy of the truth.”

The approvals process is one of the most striking improvements the company has seen by moving from the paper-based process. “Approvals workflow is automated now,” explains Maggart. “They move methodically along a path to the right people, and like everything else in OpsBid, they’re easily accessible to those who need to verify them.”

An equally radical improvement has been observed in reporting. “You can imagine what reporting was like before,” Maggart says, “with paper and electronic information isolated on pc’s and in file cabinets all over the place. Now it’s all centralized, and management can pull up customized reports with whatever information they need for analysis. There’s real time visibility into all contracts, change orders, purchase orders, invoices and budgets. And this information can be pulled up in multiple ways depending on your area of responsibility: whether you’re an operational manager, redevelopment manager, asset manager, contractor, project manager, or a compliance manager for an institutional investor. Even our COO jumps into the system to review and approve documents. We’re able to set parameters for who can access what information.

“As far as storage of electronic documents, RealPage is hosting the system with major firewall infrastructure and disaster recovery, so we’re not worried about our data. All our documentation is safely stored in the system: bids, contracts, lien wavers, payments, change orders, etc. Since we began using OpsBid, we have passed Sarbanes-Oxley audits on the first round every time.”

Driving Prices Down with Better Bidding

OpsBid is allowing Berkshire to more easily group projects in geographical areas, so what was once a 600-unit job might be part of a 6,000-unit job. Relishing these larger projects, contractors are much more likely to deliver bids with dramatically lower per-unit costs.

Part of the improved bidding process is the new ability to review historical project records, without digging through paper files in multiple locations. This historical information enables more informed decision-making about new project bids and cost projections.

Staying on Budget

“There were times before OpsBid where projects were moving faster than approvals of contracts and expenditures, and that’s a recipe for overspending,” says Maggart. “With contracts sometimes taking weeks to make their way around the organization, it was all too often ‘let’s get the job done and worry about the paperwork later,’ he explains.

“Now, when necessary, we can go from bid to contract in a matter of hours,” he adds. “We can get jobs going more quickly.”

Contractor and Supplier Network

Berkshire has integrated OpsBid with RealPage’s OpsTechnology Supplier Network. Bid requests can be put out to multiple contractors and vendors, and bids reviewed, with a new level of speed and ease. With many more suppliers competing now, and historical Berkshire project data available for comparison, the company has been able to exert a marked downward pressure on project costs.

Labor Savings

Not as obvious as the cost savings from more competitive bidding, but certainly significant, are the savings in labor at Berkshire. Today, one contract administrator can do the work that previously required four. Berkshire is also outsourcing invoicing to RealPage now, which they estimate is saving around $7 to $10 per invoice in labor costs. And harder to quantify, but probably most significant, are the labor savings all along the various workflows as electronic documents move methodically along without the necessity for digging up, sending or faxing paperwork.

Working Together

Rehab projects involve dozens of managers, from on-site managers to top management at the home office looking for an eagle’s-eye view of what’s going on. They involve dozens of vendors as well. One OpsBid benefit Berkshire has found particularly valuable is easier cooperation and collaboration amongst Berkshire managers, and between Berkshire and its vendors. A swamp of paperwork, phone calls and emails has been mostly replaced with orderly on-line processes that invite easy collaboration. Not only is valuable time saved, but errors, oversights and misunderstandings have been greatly reduced.

Looking Ahead

“Of course, we hope market economics are such over the coming months and years that we can continue to crank these projects up,” concludes Maggart. “As we do, they won’t look the same as they did when they went dormant. This time, they’ll be running smoothly, efficiently, and more cost-effectively. This is a big change in the way we do business, and it’s going straight to the bottom line.”