Forethought required with building projects

by Jeff Wells

for the Busines Journal

In business, "first to market" wins. Once a company decides to build a new facility, it is always driven by three concerns: "When will it be finished, how much is it going to cost, and how many headaches is this going to cause me?"

In response to these drivers, design-build and fast-track projects are in vogue.

A design-build project has a single contract between the owner and the builder. The builder (known as the prime) is responsible for both design and construction. This prime contractor then hires the architect as a subcontractor.

In theory, the project cost will be fixed from the earliest stages, and because of single-source accountability, there should be fewer hassles for the client. It is also possible to deliver the project faster because the bidding stage can be eliminated.

A project can be fast-tracked under the auspices of a design-build contract or with the traditional relationship between the owner, contractor and architect. In this scenario, the project is broken up into packages so that construction work can start before the entire design is complete.

This is the fastest way to get a project built, but it can be more expensive and may not produce the optimum design. Things move so fast that time often isn't available to consider all the options.

When the Catholic Church in France decided to build the Notre Dame Cathedral, it didn't have an architect prepare plans and specifications, solicit bids and award the job to the low bidder. Instead, it selected a master builder.

So, those who speak of design-build and fast-track as new methods are taking too short a view of history. Modern complexities, however, mean there are abundant opportunities to mess it up.

One thing these project-delivery methods share is the selection of the contractor before the design is complete. The builder plays a key role, and maybe even a leading role, while the design is being conceived.

Contractors have a wealth of practical knowledge to contribute. But it can also be the source of enormous problems. Experience has taught us a few things that I wish every client understood:

1. Don't select a contractor based on low bid. When your project is nothing more than sketches on the back of a napkin, how can you expect a contractor to tell you with confidence how much it will cost?

Trust me, builders know they can quote a too-low price and get away with it. This is especially true if the contractors know they're competing with others for the project. They will say anything to get selected because they can always blame the architect and owner for increasing the scope of the project as the design develops.

Unfortunately, owners who fervently want to build their projects for an unrealistic price will toss wisdom aside and believe this contractor. It never works. The team players transform into adversaries. The contractor will win enough claims for extra compensation that the owner will have to sacrifice other plans, compromise on the quality of materials, and eliminate parts of the project.

If the owner and architect stand firm, the contractor will not get enough additional money to cover all his costs, and so he loses out also. The poor architect gets eviscerated by everyone.

2. Pick a contractor based on qualifications. This is your best chance to get a project completed for the lowest price. Has this contractor successfully completed projects of similar scope to yours in a design-build or fast-track situation?

Make them prove (by citing examples) their ability to estimate and control construction cost. It's my belief that you should always hire your designer before selecting the contractor. So use the design professional as a consultant and resource.

3. Pick a contractor and design professional that can work together. To fully exploit the skills of the builder and architect, they need to be equals. Neither can dominate the other. You'll be able to figure out in just a few face-to-face meetings how they will interact.

A dominant contractor can force compromises in quality and safety whereas a dominant architect can delay the project and increase cost (not to mention bankrupt the builder).

Furthermore, don't pit them against one another. If they are competing for the client's favor, they will soon try to advance themselves by damaging the other party even to the extent of creating problems. An effective team battles the chores at hand and not each other.

4. Pay more for the design to save money. This sounds contradictory but industry research bears it out. Design fees range from 4 percent to 8 percent of the construction cost, depending upon the complexity of the project.

Increasing those design fees by 20 percent or 30 percent adds only a few percentage points to the overall project. But that translates into extra labor and resources for the architect and contractor to explore cost-saving alternatives.

Forty hours of extra work in the design phase could save hundreds of thousands of dollars in the long run. It's amazing how many clients overlook this opportunity.

5. Spot check construction costs. Insist that the project budget and construction cost estimate be reviewed at various stages of the project. Don't stop monitoring it once construction is under way, either.

If you think you need a guaranteed maximum price from the contractor, do it when there is enough information to accurately quantify the scope of the work. And definitely adhere to the next item.

6. Keep a contingency fund. Many projects have been wrecked and reputations sullied by not keeping money in reserve. Unforeseen circumstances and changes do occur.

In the preliminary stages the contingency should be 10 percent of the project's budget. As the design develops and cost estimates get more accurate, it can drop to 5 percent.

Once construction starts and the design is fixed, the contingency fund should be no less than 3 percent.

7. Control the second-guessing. There's nothing wrong with taking a fresh look at design decisions. Architects can get so focused on certain elements that the team needs to review it periodically. This is where contractors can offer valuable service.

But construction projects can be very complex, and valid reasons for certain decisions may be difficult to recall until it's too late. Thus, the time for rethinking and reevaluating solutions must be scheduled and controlled. If decisions can be overturned on the fly, then all the benefits of planning will be eliminated. The result is usually costly rework.

8. Stay out of the way. This doesn't mean the client shouldn't be an active member of the team. When I visited job sites as a brand-new engineer, I was always getting in front of a piece of machinery or hitting my hard hat on overhead structure.

I had to learn that there were certain things I could contribute that were immensely valuable to the guys in the field. There were other times when I was just in the way and maybe even a danger to myself and others. So, let the professionals do their jobs.

And one more thing: never, ever direct a subcontractor to do anything.

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