Mastering the “One Thing” While Stretching Construction Dollars

– by Doug Sitton

Featured in the August issue of SAINT LOUIS CNR – Construction News and Real Estate

Remember the exchange from the movie “City Slickers,” in which characters Curly and Mitch muse over the secret to life…the one thing? The secret to an owner’s ability to get the most out of their construction investment is the same. It all comes down to one thing – having strong leadership and management from the start of preplanning through the completion of construction.

First, a “three-legged stool” of construction must be established and should consist of the owner’s team, the design team and the construction team. To maximize success, it is important that each team – or leg – focus on performing their roles the best they can. Any team playing a double role by taking on tasks of another team creates an imbalance in the stool, resulting in conflicts of interest and inadequate control by each team over their natural responsibilities. The owner is the overall leader and manager, managing and measuring the dichotomy of continuous integration and separation of roles for checks and balances.

Next up is choosing a project delivery method and appropriately customizing it. This is a process that has become increasingly complex. It seems each method is hailed by some construction experts as being “the best,” and by others as being “flawed.” The truth is no delivery method is the best, and all have flaws. It is the implementation of the delivery that counts, not the type.

Aren’t some methods better than others? The short answer is no. All delivery methods have pros and cons, and each can be improved with customization. And, because the owner is the project leader and has the most to gain by customizing the method, the owner needs to lead the customizing effort.

Here are a few brief examples of some of the perceived flaws, as pointed out by contractors, and how the owner can overcome these challenges through customization.

Method: Design/Bid/Build
Critics’ Thoughts: You might get an unqualified general contractor, and there is no construction input during design
Customization: Establish the qualification requirements of your general contractor, and pre-qualify them prior to bidding. Make sure to involve the pre-qualified contractors during design, as they can provide valuable input relative to engineering.

Method: Multiple Prime
Critics’ Thoughts: Breaking the project into multiple individual prime contracts increases the owner’s time, cost and risk as he or she works to bid, contract and manage 20-plus contracts. And, there often isn’t a single point for construction responsibility.
Customization: Only break the project into separate packages when needed to fast-track the project to meet a critical deadline. Once the general contractor is chosen, assign any unfinished contracts to the single prime general contractor.

Method: Design/Build
Critics’ Thoughts: An early negotiated guaranteed maximum price builds in excess contingency, raising the price.
Customization: Negotiate the design builder’s costs upfront. Set the overall contract price after the completion of all competitive bidding. By that point there are far fewer contingencies.

Method:  Construction Manager At-Risk or Design/Build
Critics’ Thoughts: Bidding of early packages is typically done before all plans and specifications are complete, increasing the potential for change orders.
Customization: Scrutinize the need for early packages, and only bid early if the value gained outweighs the additional risk. Share risk equitably among the design, construction and owner teams, and increase quality reviews as necessary.

Customization should serve to reduce cost and risk, and increase value and speed in ways that benefit not only the owner, but all parties equitably. Here are some key elements that ideally would be included in any delivery method:

  • Match each party’s potential reward to their risk.
  • Integrate construction expertise into design.
  • Maintain the three-legged stool for checks and balances.
  • Bid from documents that are 100 percent complete or as close to it as possible.
  • Competitively bid all construction-related work to qualified contractors.
  • Place all construction responsibility under a single prime contractor.

There are other ways construction project owners can master the one thing, while saving money, reducing risk and increasing value. They can negotiate clear and effective contracts and make sure to place the right people in the right roles. Planning early and always is also important, as is establishing effective processes, setting performance metrics and applying cost-effective technology.

And remember, it all starts with leadership. The one thing will happen only if the owner decides to make it happen and leads the way.

Doug Sitton is president of Sitton Construction Group and regularly addresses industry association groups regarding ways to simplify the complexity of construction projects, while saving money, reducing risk and increasing value. He has 29 years of diversified experience in the design and construction industry, overseeing 500+ new construction and renovation projects with a total project cost of over one billion dollars.