Masonry Magazine October 1999 Page. 32
Problem with Competitive Bid
Continued from page 14
They have repeat clients and ongoing and trusting relationships. With these venerable companies removed from the "bidding pool", the owner using CB is left (from the very beginning) with a gaggle of less experienced, less-responsible, and lower quality bidders.
By choosing CB, the owner loses the huge benefit of having the builder involved in the value engineering process (VE). VE allows for expensive or superfluous items to be reviewed (and possibly substituted or eliminated) before they become part of the actual building package. There are ranges of quality in virtually every line item on a construction estimate and many different products and applications can often be considered-reducing the cost.
And these savings can be staggering. Why? Because (and listen carefully) - the owner and architect (as reflected in their all-to-often ill-conceived and misguided construction budget estimates) have no where near the expertise and knowledge of the builder when it comes to knowing the cost of material, labor, sub-contractors, and equipment. This is due simply to the fact that the builder works with these costs all the time day in and day out, while architects and (most) owners do not.
The total project schedule (from conception to carpet) is lengthened due to CB, due to the fact that one phase (i.e. the plans must be fully conceived and completed) must end before another begins. There's little overlap between say the design and bid stage. With negotiated and design/build work, the design and bid processes are performed concurrently. The total construction window is decreased and problems and/or clarifications with the documents are handled by all players working in unison along the way. Shorter schedules, of course, allow for cost-savings through interim (construction) interest dollars, less down-time for the owner, reduced overhead costs, and a much less stress-filled atmosphere for all involved.
So, If Not Competitive Bid...
What Else?
As mentioned earlier, there are alternatives to competitive bidding. Unfortunately they all involve trust. The most popular is the negotiated deal where the owner works together with the builder from the beginning to create the project. If the builder doesn't have in-house design services (most don't), an outside designer may also be brought in as part of the team. Now, these relationships can branch off into a myriad of contract structures such as cost-plus percentage or fixed-fee, guaranteed max, lump-sum, and/or any combination and variation that the parties feel comfortable with. The important thing is that the decisions are made as a partnership from the very beginning planning stage - with equal say given to all participants.
There is mutual trust. Even the accounting books are often opened up to the owner (or his accountant) to peruse, as a gesture of good faith, so the owner may be content in the knowledge that he's getting the best possible value and the builder is content that he's negotiated a fair (and less volatile) fee for his work - all this while minimizing dispute and delays. Now, it's no secret that many architects see negotiated and design/build deals as an assault on their turf - so you're probably not going to find many recommendations from them any time soon. It's also entirely possible that, indeed, I am letting my builder bias show through. But it's not out of greed. I genuinely and sincerely believe the competitive bid process to be a seriously flawed affair. I also believe that a partnership - built on respect, trust, and honest negotiation is the only true avenue to real and mutual value to all parties.
And isn't value what it's all about?
Editors Note: S.S. Saucerman is a full time commercial construction estimator/project manager, freelance author and lecturer for the construction industry and also teaches Building Construction Technology at Rock Valley College in Rockford, IL
32 MASONRY-SEPTEMBER/OCTOBER, 1999