Healthcare Architecture Planning Project Analysis Interiors
CONTRACTING & CONSTRUCTION ADMINISTRATION
Traditional Competitive Bidding: You may want to reconsider
For too many years it has been believed that the traditional competitive bidding process is the only way to get a project built for the best price, however this process is fraught with problems and unfortunately rewards only one thing and that is “the best price brought to the table on bid day.” Every owner wants to not pay more than a “fair” price to get their building built, but is there ever a time when it would not be in an owner’s interest to utilize the low bidder? Unfortunately it is sometimes a contractor that is in the most desperate circumstances financially that is willing to cut their price to the bone or beyond on bid day. Contractors in this condition may not survive to finish your project or if they do, they may be under pressure to cut corners because they bid the project too low just to guarantee that they would have work. Companies that build lots of buildings have come to understand that for a variety of reasons, the final price on the day they move into their building often varies widely with the price on bid day with this process. With this process, the Owner is limiting their ability to select a contractor that might be more capable or satisfactory in a number of areas because they have forced themselves into the mode of selecting the “low bidder”. Truthfully there are alternate contracting processes which can guarantee a competitive price. One of these processes is even being used in the public arena where “competitive bidding” is required by law.
All general contractors are construction managers. That is what they do. While they might self perform some small aspects of the work. The lion’s share of the work is performed by subcontractors, so finding, hiring and getting these subcontractors to perform with quality and timeliness is really the thing that separates the men from the boys when it comes to general contractors. Getting adequate numbers of subs that are truly qualified to do the work appropriately to bid the work competitively is a task that when worked hard by a dedicated manager will produce competitive pricing for 80% to 85% of the fair construction price. So how does this Construction Manager at Risk process work? The Owner simply interviews contractors on the basis of their reputation in the industry, on the basis of their satisfactory results with other clients and on the basis of what they “need” for general conditions and fee (overhead & profit) to construct the project. These additional costs are the “management” costs of the project and should be in the neighborhood of 15-20% of the total cost of the project. So why not negotiate fair fees for this part of the work and hire the “best” contractor rather than leave that selection to chance as you do with the traditional bid process. Typically then, the contractor is made part of the team early enough in the process to have input even into the design process before construction documents are complete. This way “value engineering” becomes something that the architect and engineer can manage rather than simply having quality cut out after construction documents are complete. The contract method used here is a lump sum contract which puts the construction manager at risk once they have brought the owner a final price based on competing sub bids and their general conditions costs and fees. My experience is that this process yields a final cost at move in which is generally extremely close to the original contract price.
How do I Select a General Contractor to construct my project?
Construction Manager at Risk: Good Healthcare Construction Management