The procurement of FF&E (furniture, fixtures & equipment) has a major role in the success of failure of an interior design project. The FF&E scope of work is everything in the project spaces that is bolted to the structure of the building: the couch, the throw pillows on it, the painting on the wall behind it, the coffee table in front of it, the audio and visual sets are just few examples of what FF&E scope of work could cover. The FF&E scope of work could be for new space areas or remodeling existing space areas. It also applies to all types of buildings including but not limited to hotels and resorts, commercial and residential buildings, retail shops, hospitals and clinics among others.
Interior design projects are no different than other capital construction projects where they need to be managed to reduce the high risk of projects failure. In general, interior design projects require managing the scope, schedule, cost, quality, communications, risk and procurement. Unlike other type of projects, the majority of FF&E scope of work needs to procured from local and international furniture, fixtures and equipment suppliers. The correct and timely procurement of FF&E scope of work is one of the most critical challenges to have successful interior design projects delivery. Accordingly, this article is only addressing the FF&E contracts procurement requirement and interfaces with project cost management.
Using a Project Management Information System (PMIS) like PMWeb, Interior Design Contractors can manage the different processes needed to deliver an interior design project. To start with, the contractor needs to come with a detailed a cost estimate for the FF&E scope of work as detailed in the project’s drawings, specifications and bill of quantities. The cost estimate could require detailing the provided scope of work into more details to enable coming with the right cost estimate. PMWeb cost estimating module will be used to capture those details by either adding cost items of the predefined cost database or importing the cost estimate from MS Excel.
Since the majority of the FF&E scope of work will be procured from local and international suppliers, the Interior Design Contractor needs to verify and validate the prepared cost estimate by requesting proposal from qualified suppliers. PMWeb allows creating the many different procurement packages from the approved cost estimate. Those could be for the different type of sofas, beds, cabinets, desks, chairs, curtains, carpets, paintings, fixtures, equipment among many other. For each procurement bid package, the estimate line items for the relevant FF&S scope of work and selected qualified bidders will be added. In addition, the required bid receipt date in accordance with the approved project schedule will be added. PMWeb notification tab will be used to send an email notification for the “Invitation to Bid” for the selected bidders.
This will enable the invited bidders, regardless where they are located on this planet, to respond to the bid by providing their best offers for their relevant FF&E scope of work. The online bid module allows attaching pictures, drawings and other documents that could be needed by the interior design contractor. For the bid line items, PMWeb has a field to add the manufacturer name, if this is a requirement. In addition, a scoring checklist can be created to detail items that need the invited bidder or supplier to confirm compliance with.
When all online bids are received, the bid package procurement module allows comparing the received bid prices with the approved cost estimate. This will immediately help in identifying any discrepancies, front loading or any other type of unbalanced bids. This will enable the interior design contractor to have the insight for a sound bid award decision.
One of the challenges that could face interior design contractor is how to maintain a comprehensive register of all suppliers, factories and contractors that could be invited to bid on the outsourced FF&E scope of work. PMWeb Vendor Prequalification module provides an online platform where all those suppliers, factories and contractors can submit their qualification and experience documents in the format required by the interior design contractor. All those qualification documents will be submitted online regardless where those suppliers are located. This will provide the contractor with a comprehensive yet objective to qualify those companies and maintain an updated list of all those companies who are qualified to bid on the FF&E scope of work to be delivered by contractor.
For each awarded FF&E contract, PMWeb commitment module will be used to capture the complete details of the scope of work. Each commitment line item will include the quantity, unit of measure and unit price which could be in different currency even for a single commitment contract. PMWeb allows setting static or dynamic currency exchange rates to come with the total cost using the project currency. For each contract, the payment terms and conditions will be added including any adjustments for VAT, Tax Withheld or any other type of taxes the contract will be subject to.
In addition, each commitment line item needs to be associated with the relevant cost breakdown structure (CBS) code that will be used by the Interior Design Contractor to contractor to consolidate all project’s cost information including those in the cost estimate, online bids, commitments, progress invoices, potential change orders, change orders, actual payments made, revenue contracts, change orders, requisitions and actual payments received.
In addition, it is important the planned payment dates for each line item in the commitment contract as the will enable the interior design contractor to better plan the outflow of payments to be done and coordinate the same with the income or revenue contract with the Project Owner or Prime Contractor. PMWeb allows spreading the anticipated payments manually by period or use one of the projection curves that PMWeb has.
As the project progresses, PMWeb potential change order and change order modules will be used to capture all changes that could have an impact on the awarded contracts awarded value or completion dates. The potential change order module is the process that is viewed by many as an “Early Notification Warning” of an event or action that could lead to a change. If the potential change order is approved if it was found that it has merits, the change order process will be generated for which it could lead to an approved, rejected or disputed change order.
Also, the project progresses, the suppliers will submit their interim payment certificates (IPC) for procured, delivered and installed furniture, fixtures and equipment. PMWeb allows linking each item in the progress invoice with its relevant project schedule activity to provide the option of using the project schedule activity percent complete to calculate the due progress payment. For each progress invoice, there will be a payment tab to capture the details of the amount actually paid against the approved progress invoice. The process of submitting interim progress invoices until a supplier completes the awarded scope of work and final account is issued.
Similar to the commitment contract, PMWeb allows adding the details of the revenue or income contract agreement between the Interior Design Contractor and the Project Owner or General Contractor. For each contract, PMWeb allows capturing all approved, pending, rejected and disputed change orders. In addition, PMWeb allows capturing the details of all interim progress invoices submitted by the Interior Design Contractor and details of actual payments received. Similarly, all revenue contract, change orders and interim progress invoices need to be assigned with their relevant cost breakdown structure (CBS) code. In addition, each contract line item as well as progress invoice line item can be associated with their relevant project schedule activity. This will be aligned with the cost-loaded schedule developed by the interior design contractor to identify the cash inflow from interim progress invoices payments.
Nevertheless, for the interior design contractor to be able to do an effective cost control on procured FF&E contracts, the comparison should not be done between the revenue contract and the executed FF&E contracts. This is due to the fact that the interior design could have unbalanced the bid by front loading certain line items and relocating the overhead and profit in an even format. Therefore, a project budget should be created from the final approved cost estimate, for which it was the basis for the awarded FF&E contracts and the revenue contract agreement to identify the contingency, site overhead, home office overhead and profit allocation. Each line in the project budget can be in any selected currency and it needs to be linked to its relevant cost breakdown structure (CBS) code with the option to be linked to the relevant project schedule activity.
If there is a need to make any changes to the baseline budget whether for increasing or decreasing the budget or transferring funds from one cost item to another within the same project or between different project, PMWeb Budget Request module will be used.
Similar to all other PMWeb project management processes, every PMWeb process detailed above can be attached will all supportive documents that will be usually uploaded and stored in PMWeb document management repository. In addition, links to relevant PMWeb records and imported MS Outlook emails can be added to each process transaction.
In addition, each process detailed above can be associated with a workflow to formalize the submit, review and approve process. The workflow will be used to map the workflow tasks, their sequence, duration, responsibility, conditions for resubmit, possible actions among others. The workflow could also have conditions to map the approval authority levels usually associated with financial transactions. This will ensure complete transparency and accountability in executing processes.
The cost data captured in all of those PMWeb out-of-the-box project management processes will be automatically stored in PMWeb cost ledger. The single cost data repository will be used to consolidate, monitor, evaluate and report a single version of the truth of the cost performance of the different FF&E contracts. PMWeb Cost Worksheet module can be used to create all of the needed spreadsheets that will report on the trust-worthy data captured in the different PMWeb processes. PMWeb cost worksheet allows select the needed cost data columns to be displayed as well as create new columns by adding formulas between the different captured cost data information. The cost worksheet can be exported to MS Excel if needed for Scenario What-If Analysis.
The cost worksheet information as well as the information captured in all of the processes detailed above will become available to be reported on in a desired form and format. Reports can be limited to a single project, program of projects, projects’ portfolio or the complete projects managed by the interior design contractor. The reports can include tables and visuals to provide oversight view of the captured information.
About the Author
Bassam Samman, PMP, PSP, EVP, GPM is a Senior Project Management Consultant with 40-year service record providing project management, project controls services and project management information system to over than 200 projects with a total value in excess of US $100 Billion. Those projects included Commercial, Residential, Education and Healthcare Buildings and Infrastructure, Entertainment, Hospitality and Shopping Malls, Oil and Gas Plants and Refineries, Telecommunication and Information Technology projects. He is thoroughly experienced in complete project management including project management control systems, computerized project control software, claims analysis/prevention, risk analysis/management (contingency planning), design, supervision, training and business development.
Bassam is a frequent speaker in topics relating to Project Management, Strategic Project Management and Project Management Personal Skills. Over the past 40 years he has lectured at more than 350 events and courses at different locations in the Middle East, North Africa, Europe and South America. He has written more than 300 articles on project management and project management information systems that were featured in international and regional magazines and newspapers. He is a co-founder of the Project Management Institute- Arabian Gulf Chapter (PMI-AGC) and has served on its board of directors for more than 6 years. He is a certified Project Management Professional (PMP) from the Project Management Institute (PMI), a certified Planning and Scheduling Professional (PSP) and Earned Value Professional (EVP) from the American Association of Cost Engineers (AACE) and Green Project Management (GPM).
Bassam holds a Masters in Engineering Administration (Construction Management) with Faculty Commendation, George Washington University, Washington, D.C., USA, Bachelor in Civil Engineering – Kuwait University, Kuwait and has attended many executive management programs at Harvard Business School, Boston, USA and London Business School, London, UK.