Thursday, April 2, 2009

Eventually we'll just do it by auction

I was reminded recently during a conversation with a colleague how buildings get built and how the different methods can make a difference in construction and pricing.  There are three primary ways: Design-Bid-Build, CM/GC, and Design-Build.  Allow a Shorty to explain.

Design-Bid-Build: This is a fairly traditional method for building delivery, and it's how buildings have been built for the past several decades.  It's also called hard bid.  An architect draws up the plans, the plans are priced (sometimes by an independent estimator and sometimes by a contractor paid a flat fee to do so), and then the drawings are put out to bid.  Two or more contractors have one to three weeks (on average, depending on how complex the project is) to price the drawings, and then by a specific day and time, they deliver their sealed bids (in an envelope) to the owner or architect.  They open the bids and pick the one they like (usually the lowest).  Then the architect and/or owner interviews the selected contractor further and asks about their insurance, etc.  If they're satisfied, they move forward with that contractor.  If not, they send them out the door and go to the next least expensive contractor.  If none of the bids come in under the budget they set for themselves (they don't tell any of the contractors what that budget was), they either revise the drawings and rebid, or they hire a contractor and have them help VE* the drawings.

CM/GC: These letters stand for Construction Manager/General Contractor.  An owner and his/her/their architect interviews contractors and will supply them with some info about the project, perhaps even allowing them to look at schematic design documents to produce preliminary pricing on them.  The contractor gets hired before the architect is done with the design and the drawings and gets to review the drawings on a regular basis in order to work out constructability, budget, and schedule issues.  VE can take place before the project is done so that the owner doesn't get blindsided by sticker shock after getting their hopes up.

Design-Build:  Usually, the architect and the contractor work for the owner, but under design-build, the architect works for the contractor, and the contractor alone works for the owner.  It's like CM/GC on steroids.  It's sold to the owner as a one-stop shop/source for a design and good construction services.

Wheatlands was a CM/GC job, and we had two rounds of VE on it.  It was painful; by the end of the construction it felt like a design-build project.  It got to the point where the contractor said "take this out of the project" and we just had to friggin' do it.  At the end, the project, though ultimately lovely, was a shadow of its former self.  Problem with that is that owners tend to forget the budget stuff but remember that damn architect gave us a shoddy-looking building.  Because of the economy, hard bid may be making a comeback.  Owners, even on complex projects like healthcare, feel like getting the best deal possible by pitting contractors against each other.  I find this petty, but talking to my colleague gave me a different point of view.  His experience has been that every contractor's preconstruction services (the CM of CM/GC) are crap.  They've got the job, so now their goal is to VE out anything that looks like it might be a pain in the ass to build.  CM/GC, in my colleague's experience, is a way for contractors to maximize their profit with a minimum of work.  He said that the project he worked on in the past ten years in which he felt the owner got the most for their money was a public project that was hard bid.  After all the change orders settled out at the end of the project, the project's final cost was only $500 off from the independent estimator's original estimate.

It will be interesting to see what the immediate future holds for the construction delivery process, especially in regards to the economy.  Will we all revert back to hard bid while the gettin's good?  We shall see.

*VE means "value engineering."  It's a fancy phrase for "take money out of a project through simplifying stuff, specifying lesser products, eliminating program, etc.  It bites.

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