The School District’s Role in Delivering Construction Successfully

– by Doug Sitton

Featured in the July/August 2009 issue of the MOASBO JOURNAL

There’s never been a more important time to stretch your construction dollars. And only the school district (owner), in their role as project leader and manager, can ensure they get the maximum value for their investment. In this article, we will discuss the roles on a typical construction project, and how the owner can provide the leadership and management to increase the chances of total success for the entire team.

The One Thing Owners Must Do to Stretch Their Construction Dollars

You may remember this exchange from the Movie “City Slickers”:
Curly: Do you know what the secret to life is?
Curly: This (holds up one finger).
Mitch: Your finger?
Curly: One thing, just one thing. You stick to that and everything else don’t mean s#%@.
Mitch: That’s great, but what’s the “one thing?”
Curly: That’s what you’ve got to figure out.

The secret to construction is the same – there’s one thing, just one thing. As an owner, you stick to that and everything else don’t mean s#%@.” That’s great, but what is it – what’s The One Thing you must do as the owner to get the most for your money?

Is it choosing the right delivery method? In spite of sales pitches to the contrary, there is no “right” method. They all have the potential to maximize the return on investment, depending on the owner’s ability to customize and manage the method chosen.

How about delegating most of your risk and responsibilities to the design team or the construction team? Unfortunately, the owner cannot rid themselves of their responsibilities and risk. The more they give away, the less control they will have over the project outcome, especially their own outcome. The key is appropriate allocation and management of risk and responsibilities by the owner.

Or hiring companies you trust, and getting out of the way? Trust is one thing; performance is something else. Top performers, managed by the owner with a “trust, but verify” approach, will always outperform companies left on their own.

Then it must be avoiding low bid selection for construction? Low bid is a good thing, unless it’s from an unqualified contractor. Without competitive bidding by qualified contractors, you can’t maximize your return.

Well then, what’s The One Thing? You don’t have to figure it out on your own – it’s been proven over and over again. The One Thing an owner must do to get the most for their construction investment is: provide strong leadership and management from the beginning-of-planning to the completion-of-construction.

Design and construction are very complex, and every project has its unique challenges. No delivery method or abdication of responsibilities to other parties will eliminate the many challenges. Only proactive, strong management by the project leader – the owner – will maximize the owner’s return on investment. Don’t have the time or expertise to manage design and construction? That’s ok; but find someone who does, because it’s The One Thing.

The Three Key Roles in Construction (Three-Legged Stool)

The three-legged stool of construction consists of the Owner, the Design Team and the Construction Team.

To maximize success, it is important that each team – or leg – focus on performing their role 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.

Customizing “Your” Delivery Method

Choosing a project delivery method has become increasingly complex, with new methods and hybrids sprouting up on a regular basis.

Every delivery method is hailed by some construction experts as “the best”, and by other construction experts as “flawed”. The truth is none are the best, and all have flaws. In the end, it’s the implementation of the delivery that counts, not the type.

But aren’t some methods better than others? The short answer is “no”. They all have pros and cons, and can be improved with customization. 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.

So let’s look at a few brief examples of “flaws” of each method pointed out by contractors, and how the owner can improve them.

Method: Design/Bid/Build
Critics: “You might get an unqualified general contractor, and there is no construction input during design.”
Customization: Establish qualification requirements of your general contractor, and prequalify general contractors prior to bidding. Involve the prequalified contractors during design to provide value engineering input.

Method: Multiple Prime* (as delivered by general contractors under CM as Advisor**)
Critics: “Breaking the project into multiple (20+) individual prime contracts increases the owner’s time, cost and risk due to the increased effort to bid, contract and manage 20+ contracts, and to not having a single point of construction responsibility (general contractor).”
Customization: Break the project into separate packages only as 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.
*The Multiple Prime method of splitting the project by the major trades is not addressed here.
**CM as Advisor is actually a professional service applicable to all delivery methods.

Method: Performance Contracting
Critics: “The contract amount is set before plans are developed and competitively bid, which builds in excess contingency, raising the overall price.”
Customization: Negotiate only the performance contractor’s costs upfront, and then set the overall contract price after competitive bidding of all construction has been completed. Contingency at that point will be much less.

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:

  • Place each responsibility and risk with the party that controls it most directly
  • Match each parties potential reward (profit) to their overall risk
  • Integrate construction expertise into the design
  • Maintain the three-legged stool to avoid duplications or gaps in responsibilities, and maintain proper checks and balances
  • Bid from documents that are 100% 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

The 10 Steps to Mastering The One Thing
Providing Strong Leadership and Management
 to Save Money, Reduce Risk and Increase Value on Construction Projects

  • Utilize independent expertise. This means expertise representing only the owner, with no direct responsibilities for the design or construction teams. The expertise needed is design and construction, as well as leadership and management.
  • Maximize competition for selection. Hire “the best of the best” for every role on the project. That means never selecting on low bid alone.
  • Negotiate effective contracts. Make sure everything is clear up front, and documented in the contracts. Establishing the right scope of services for each party, and properly allocating risk and compensation.
  • Place the right people in the right roles. Know that each project participant is qualified and experienced for their specific role.
  • Plan early. The 6 P’s: Proper Planning Prevents Pretty Poor Performance. The traditional obstacles and mistakes in a construction project are well known. Plan ahead to avoid them.
  • Establish effective processes. Identify tried and true processes, and train the entire team in their use. Integration, communication and documentation are primary processes.
  • Set performance metrics. What does a successful project look like? How will quality be measured – in everything? Establish metrics for all aspects of the project, even those that are hard to measure.
  • Manage early and always. Only strong management will keep the right people in the right roles doing the right things at the right time. Manage the first 10% like the project depends on it – because it does. Then don’t let up.
  • Apply cost-effective technology. Utilize technology based on saving time, and improving quality and long-term value.
  • It all starts with leadership. Maximum success will happen only if the owner decides to make it happen and leads the way.

Doug Sitton is president of Sitton Construction Group, a professional construction management firm. Mr. Sitton 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.