By Mark Cladny, On Site Systems
Lump sum competitive bidding is regarded by many as being the customary contracting method which yields the best competitive price for the job. In this method the project owner or developer hire an architectural firm to design the project and administrate the construction. The architect must be accessible and available to the builders, preferably on the project site, to clarify the documents and advise on problems once discovered. The architect has prime responsibility of reporting budget and schedule information to the owner in a timely manner so that adequate funds are available to complete construction. The architect typically administers the changes to the project and must therefor have adequate skills to negotiate price and schedule effects. Many times an adversarial relationship can develop, since typically the architect and contractors position early for later claims. The responsibilities for issues are foremost in the discussions and often much time and energy is spent on building cases rather than resolving conflicts.
There are many factors which determine if this method is suited to a project. They include:
Interference with other contractors or public agencies.
Interference with existing tenants or occupants.
Major Advantages
1. This is the traditional approach, which is the most understood contracting method consistent with free competition.
2. Construction costs become fixed once the project is bid and awarded, except for changes to the project or to the documents. Inflationary or availability costs are no longer a concern of the owner.
3. Once costs become fixed, cost for changes to the project become more easily identifiable so that appropriate budget catagories can be more easily adjusted.
4. Given the completeness of the project documents, overall construction costs could be lower. The competitiveness of the industry at the time of bidding will have a substantial influence on the bids, however.
5. Responsibility and liability for for design and construction issues are more easily identified.
Major Disadvantages
1. Often, roles of owner, architect, and contractor become adversarial, as responsibility for issues polarize the problem solving process. Contractors become less likely to offer suggestions to solve the complex problems which are inherent in the process.
2. The owner looses much control over the quality of building components. Sole source specifications of building compenents dramatically raise building costs and are usually against public policy tenents of free and open competition.
3. The project viability is uncertain until project is bid and under a construction contract. Overall construction costs are estimated through the design phase, but remain uncertain until bidding occurs. Architects and cost consultants can not estimate the competitive climate at bid time, nor the availability of materials and labor, resulting in cost uncertainty. The risk that the project will be too expensive remains wholey that of the owner or developer.
4. Overall construction time is lengthened, as lump sum competitive bidding is inappropriate for issuance of the documents in partial releases or bid packages. Design must be finalized before the documents are released unless and extensive bid package coordination effort is undertaken.
5. Preselection of subcontractors and other building team members is difficult, as pre-selection of these entities limits competition, reducing a major advantage of the lump sum bidding process. If pre-selection of subcontrators is undertaken, administration of the process adds to the pre-construction costs and is difficult to enforce.
6. A large segment of industry expertise is left untapped during the design phase. Formal inclusion of subcontractors and suppliers is replaced with informal consultations, with liability and risk remaining that of the architect and/or owner.
Major Advantages
Major Disadvantages
The owner looses control of much of the design, except for those issues which have been meticulously defined in the building criteria. At times, the aethetic, performance, reliability and building system compenents can not be adequately defined to the satisfaction of the end user.
Depending on the method of reimbursement of costs, the avoidance of the liability and responsibility for issues may not justify the loss of control of the design process.
The owner looses much of the series of checks and balances that exist within the traditional contracting methods.
The higher risks associated with the design/build method will necessitate higher fees for the design/builder than the traditional methods with comparmentalized risks.
A lump sum cost approach to this method will cause the design/builder to include broad budgets for items of uncertainty to ensure that the construction budgets are adequate.
Major Advantages
G.C. contributes to a synergistic team approach in the owner’s interest.
Value engineering can be done at a time when its results can be most easily incorporated into the design. Major design decisions can be made on the basis of complete information.
G.M.C. early facilitates financial planning and avoids potential delays for redesign caused by budget problems recognized too late.
All records, books, estimates art "open book".
Prudent buying and value engineering with trade contractors results in cost savings reverting to owner, not general contractor.
Competitive bidding is retained on all work, except a portion of that which the G.C. may perform with his own forces.
Flexibility to pre-qualify trade contractors for better control of schedules and costs.
The G.C., who is responsible for costs, schedule and quality, can be selected based on knowledge, experience, and performance record.
Schedule is controlled during design phase. to ensure that design efforts are integrated with construction phase requirements.
Facilitates fast track or phased construction providing earlier completion.
Cost savings available through earlier start and pre-purchasing.
System of checks and balances exist.
Single prime responsibility for construction.
No additional owner personnel required to monitor construction.
Ability to pre-order long lead items.
Resourceful G.C. may have superior capability in certain trade work (i.e. concrete work) than available trade contractors.
G.C. who self-performs critical work (i.e. concrete) can "set the pace" for the job and better control the schedule.
Superior liability insurance coverage is provided by a general contractor their might be available from multiple prime trade contractors involved in a "pure" C.M. approach.
More flexibility than C.M. process for G.C. to accomplish miscellaneous construction work. (i.e. general conditions, miscellaneous carpentry, etc.)
Major Disadvantages
Duplication of some supervision, contractors' mark-ups, and bond costs, particularly if G.C. does not do any work with his forces. These costs must be offset by value engineering, etc.
Project may not be fully designed at start of construction, which may expose owner to change orders. This potential is inherent in any form of fast-track construction, but can be controlled to a minimum.
Difficult to arrange within structure of public bidding laws on public sector projects.
Many contractors who claim to have expertise in services similar to C.M. do not.
General Contractor cannot be considered an agent of the owner in a pure sense, and may not be viewed as to have owner’s interests as a priority.
Major Advantages
Construction costs are identified and predicted reliably during the design phase. Team interacts relating to construction cost, completion schedule, and quality work to maximize owner’s value.
C.M. contributes to a synergistic team approach in the owner's interest.
Value engineering by C.M. can be done at this time when it can be implemented into the design. Major design decisions can be made on the basis of complete information.
C.M. early facilitates financial planning and avoids potential delays for redesign caused by budget problems recognized too late.
All records, books, estimates are "open book".
Prudent buying and value engineering with trade contractors results in cost savings reverting to owner, not general contractor.
Competitive bidding is retained on all work.
Flexibility to pre-qualify trade contractors for better control of schedules and costs.
The C.M., who is responsible for costs, schedule and quality can be selected based on experience and performance record.
Schedule is controlled during design phase to ensure that design efforts are integrated with construction phase requirements.
Facilitates fast track or phased construction providing earlier completion.
Cost savings available through earlier start and pre-purchasing.
System of checks and balances exist.
Single prime responsibility for construction.
No additional owner personnel required to monitor construction.
Ability to pre-order long lead items.
Major Disadvantages
Duplication of some supervision, contractors mark-ups, and bond costs, particularly if C.M. does not do any work with his forces. These costs must be offset by value engineering, etc.
Project may not be fully designed at start of construction which may expose owner to change orders. This potential is inherent in any form of fast-track construction, but can be controlled to a minimum.
C.M. may not have same ability to directly influence construction schedule as G.C. does.
The owner would retain control over various aspects of the project and would continue to be involved providing overall general direction to the project and have direct access to each team member, assuring that the facility will function in the most efficient manner.
The owner can select the people from each organization: architect, consultants, construction manager for assignment to the project based on their competence, compatibility and ability to work with other team members.
The C.M. process provides for early involvement of mechanical and electrical construction expertise in value engineering and scheduling to ensure that the systems are designed for economical installation and operation.
Financing arrangements may be concluded earlier, which depending upon interest rate trends, could avoid increases in financing costs.
Through the construction manager, the owner would maintain control over the bidding process.
The construction manager can assure a more thorough solicitation of sub-bids than would be achieved through the normal competitive bidding situation. This provides for increased competition and gives the owner the benefit of the best sub-bids. In addition, there is flexibility in the selection of subcontractors on the review and value analysis of sub-bids. All or most savings created through prudent purchase techniques and value analysis reduction accrue to the owner.
The owner would actively participate in the review of sub-bids and approval of subcontract awards. This offers the advantage of selecting subcontractors not only on the basis of low bid but the ability to perform within the construction manager’s schedule.
There would be better coordination and more flexibility in regard to partial occupancy of the space to accommodate the owner's schedule. The construction schedule would be structured and revised to accommodate this process.
The construction manager's personnel would assist the owner's "in-house" arrangements for work outside the construction contract, including the incorporation of owner furnished equipment in the new construction.
All cost records, books, etc. are available on a full disclosure basis.
On Site Systems provides construction management and consulting services on an as needed basis including:
Construction Management | Owner Representation| Pre-Construction Planning | Construction Administration | Claims Management