The Context:  Your anniversary is coming up and you want to treat your spouse to a very special dinner; you have budgeted $125 per plate, and you think about what you want to achieve to make it special. 

Scenario One.  You go to your favorite restaurant and meet with the head chef.  You ask him to come up with a meal that includes three courses – salad, dinner, and desert – as well as a bottle of wine.  The meal should start at 6:00 pm and be done by 8:00 pm so you can get to your concert.  The salad must contain fruit, the dinner a pasta with chicken, and the desert must be chocolate.  Next week you come back to see what he has designed based on your discussion and it sounds wonderful.  The salad is raspberry vinaigrette with raisins and goat cheese, the main course is chicken breast with capers in a light wine sauce and the desert a flourless chocolate cake with a raspberry sauce.  All of the courses will be presented very artistically.  You are thrilled with everything, but have a couple concerns.  You know the chef but you haven’t met the line cooks; can they make this meal just as described?  You ask the cost and the chef says he is pretty sure that it’s at the budgeted amount, but he won’t know until the day of the dinner.  Not knowing for sure if this will meet your budget you come up with a plan to reduce the portion sizes, substitute the custom raspberry dressing for a ranch, and downgrade the bottle of wine.  This is disheartening to both you and the chef, as you want to make the evening perfect.  You also realize that the dinner may come in under budget, so you come up with the option to have the meal as designed, upgrade the bottle of wine and add a course of soup as well.  You also discuss the schedule, and the chef says the line cook will be ordering the components and he is monitoring the quality.  He doesn’t know exactly how long it will take to prepare the meal but, based on his experience, he believes that two hours should be enough time.  You leave nervous  because you don’t know exactly how the dinner will go, you don’t know the cost, you haven’t met some of the key players preparing the dish, and you are not 100% sure the meal will be done in time for the show.  This is the hard bid meal.

Scenario Two.  You go to your favorite restaurant to meet with the chef.  You ask him to come up with a meal that includes three courses – salad, dinner, and desert – as well as a bottle of wine.  The meal should start at 6:00 pm and be done by 8:00 pm so you can get to your concert.  The salad must contain fruit, the dinner a pasta with chicken, and the desert must be chocolate.  Your meeting with the chef goes well and you lay out the basic design of the dishes.  After the meeting you decide to call in a few line chefs who will work on the preparation.  Immediately you recognize that one line chef seems to have more experience with chicken, pasta and chocolate desserts, and you ask specifically for them to prepare the meal.  The three of you sit down and begin finalizing the meal.  The salad is raspberry vinaigrette with raisins and goat cheese, the main course is chicken breast with capers in a light wine sauce and the desert a flourless chocolate cake with a raspberry sauce.  All of the courses will be presented very artistically.  Next week you come back to see what has been designed based on your discussion and it sounds wonderful.  The line cook has been talking to the chef but hasn’t seen the final meal.  He expresses concerns about the cost, as the salad selected has to be brought in from California, the chicken is a select cut and will require four chickens which increases cost, and the chocolate cake could be done cheaper by making it a regular cake, not flourless.  You meet with the line cook chef again the next week to go over the schedule and pricing of the meal as designed, only to find it is over budget.  The schedule is laid out in detail and there appears to be no issues.  After reviewing all the options you decide to go with a lower grade bottle of wine, slightly reduce the portions of the meal, use local salad but make sure its organic, cut out the select cuts of chicken (as you felt it was frivolous) and keep the cake as designed.  You leave knowing what the meal is going to be good, you know the schedule, and you have met those who will be preparing the meal.  You also feel like the meal is a little more expensive than it should be, but also know that the line could talked to more than one food supplier so you are getting a good value.  This is the CM/GC meal.

Scenario Three.  You go to your favorite restaurant to meet with the line cook, asking him and the chef to come up with a meal that includes three courses – salad, dinner, and desert – as well as a bottle of wine.  The meal should start at 6:00 pm and be done by 8:00 pm so you can get to your concert.  The salad must have fruit, the dinner a pasta with chicken, and the desert must be chocolate.  You meet with the line cook and chef who pull out their menu.  They advise you to select the house salad which contains fruit, the chicken marsala, and the flourless chocolate cake.  The prices are not on the menu but they tell you that the meal will be on time and delivered for your budget guaranteed.  You have been to the restaurant before and trust that team will work together to make it special.  You leave having a pretty good idea of what the meal will be, you have a guarantee on the schedule, and you know who will be preparing the meal.  You realize that you don’t know exactly what the meal will be like, if the lettuce is organic, or if you overpaid, but that’s ok as you want to get back to doing other things anyway.  This is the Design-Build meal.

Scenario Four.  You go to your favorite restaurant and you meet with the chef, mater dee, sommelier, line cook, and pastry chef.  You discuss that you would like to have your anniversary dinner and make it as special as possible within your budget and schedule.  The meal is to include three courses – salad, dinner, and desert -  as well as a bottle of wine.  The meal should start at 6:00 pm and be done by 8:00 pm so you can get to your concert.  The salad must contain fruit, the dinner a pasta with chicken, and the desert must be chocolate.  The team understands the goals and decides that in this case the Mater Dee will be responsible for the coordination.  The mater dee starts by contacting the hostess and reviewing the reservation schedule.  As it turns out the best seat in the house is available and is reserved.  The team then discusses the meal and, using their experience, proposes that the salad should be a tangerine vinaigrette with pine nuts and goat cheese.  Before they go any further you tell them that your spouse is allergic to nuts and is not a huge citrus fan.  You suggest raspberry vinaigrette with raisins and goat cheese.  The team agrees but wants to discuss all parts of the meal before deciding.  After much discussion the meal ends up to be chicken breast with capers in a light wine sauce, and the desert a flourless chocolate cake with raspberry sauce.  All of the courses will be presented very artistically.  The mater dee is tracking the cost with the help of all involved and notices that they are exceeding the budget.  The team gets together to discuss and some ideas to reduce cost are presented such as a lower grade bottle of wine, slightly reduced portions, using local salad, and cutting out the select cut of chicken.  In this meeting the sommelier notices that the wine being used in the chicken dish is very expensive and suggests that the chef use a bottle of a similar wine already in the store.  He also suggests that the salad from California is cheaper than the local if it is shipped with the wine that they have selected from the same region.  The pastry chef will also order enough raspberries for both the salad dressing and desert sauce, further reducing costs.  You leave knowing what the meal is going to be and that it will be of the highest quality.  You know the schedule, that you have the best seat in the house, and that you have met all the players that will be part of the preparation and presentation.  You also feel like you have spent a lot of time on this making it perfect.  Please note in this scenario that all involved may expect to split the savings in a form of a tip.  This is the Integrated Project Delivery meal.

As you can see from the scenarios above, the intent and basic goals of a client (in this case you, who desires to treat your spouse to a memorable anniversary meal) can be met in a variety of ways.  The final selection of method chosen comes down to the project and culture of the organization.  Delivery methods have different priorities, some are speed, some are cost, and some are precise goals that need to be monitored and met.  No one way of meeting your goals is necessarily right, nor are any entirely wrong.  It is more a matter of understanding your priorities when it comes to the entire scope of the project you desire to achieve, and making decisions that are driven by those needs.

Quentin Rockwell and Paul Wember, Wember Inc. ~ Owner’s Representative

In addition to being able to interview for qualification you can also make a selection for the best cultural fit for your organization.  If your contractor is involved early they may be part of the public presentations and need to converse with the public and board members.  Don’t under estimate this as part of your selection process as this is a key element of making your projects not only successful but often enjoyable if not even fun!

The final element that needs to be mentioned regarding staffing projects is that owners get a chance to understand how their project will be staffed.  In the selection of a CM/GC we have the proposing teams outline who will be on the project and for what durations and time commitment.  We have had times where a submitting team will not be selected, even at a lower price, due to the fact the selection committee felt the project was understaffed.  We have also been able to ask Contractors to substitute team members if we feel there is a better match for the project within the firm.

Regardless of hard bid or CM/GC we are finding the best of the best are remaining and managing projects.  The challenge of Hard Bidding is you don’t know how many staff members you will have assigned, in order to keep costs down your selected team may be asked to do a lot more than they normally would to keep costs down.

An update to our first installment will be made and include

Design-Bid-Build
 Pros

1. No changes

Cons

1. Owner will not be able to meet the team managing the project.
2. Owner will not know how project will be staffed by the construction team.

Construction Manager/General Contractor
Pros

1. Owner gets to meet the team proposed and match them to the project by culture, personality, and relevant experience including special systems the project might call for including but not limited to mechanical systems, renovation work, challenging site constraints.
2. Owner gets full understanding of how the project will be staffed including time dedicated to the project by proposed team.

Cons

1. No Changes

Quentin Rockwell and Paul Wember, Wember Inc.~Owner’s Representative

1. The process provided a lower price for the Owner
2. The process allowed more contractors to bid the project

  The design team incorporated many alternates into the bid documents with the hope of accepting at least a few of them at the time of bidding, as stated, the market netted bids well below the estimate provided by the design team.  All of the alternates were immediately accepted and others have been introduced since the bid day.  With the CM/GC process it is often common to have alternates priced as bids can often come in lower than the progress pricing, however, it is highly unlikely that they would come in 30% lower using the CM/GC process.  At this point the Green Valley Ranch team is scrambling to introduce alternates that were excluded at the time of the bid, including upgraded finishes and other items.  The architect will now be compensated to draw these additional alternates, and we are now concerned we may see change order pricing in lieu of hard bid pricing for these options.  If the CM/GC process were used, we may not have received the 30% savings, but the building would have likely been designed closer to the program due to the fact that we were receiving market and sub-contractor rates as progress pricing was provided throughout the design process.  This proves without a doubt that it is a tough time for estimators as fluctuations in pricing and historical data, including cost per square foot are difficult to gauge.

Another challenge now facing the project team is that now that the project is under budget, there is a request to put the savings back into the general bond instead of the using it specifically for the project.  From a Client’s perspective this is not the ideal situation, as they know they get only one chance to create a project such as this.  Now that the building is designed and priced, they are not able to make significant changes to the building, including adding back the square footage they eliminated during the design process to stay within the budget.

All of this said the Client is thrilled that such aggressive pricing has been received, and that many contractors were given an opportunity to be part of this great project.  Conversely, they are disappointed that the pricing was so far off from the original budget estimates that they lost the opportunity to make the enhancements that they could have made were they armed with more accurate market pricing information during the design process.Click to view slideshow.

Quentin Rockwell and Paul Wember, Wember Inc.~Owner’s Representative

For context, and to set the stage for our future blogs on this subject, the status of each project is as follows:

Green Valley Ranch – the project has been fully designed, and we are in the final stages of contractor selection; construction will likely begin within four to six weeks
Stapleton – the project is currently in concept design and the team is continuing to meet with the community to gain input on the design; the CM/GC will likely begin preconstruction services in two to four weeks

It should be pointed out that each of these libraries, while operating under a different style from the Library staff perspective, will be similar in size (26,000 to 28,000 square feet), and will contain many similar features.  All the more reason to hold the two projects up against the same light of analysis.

Objectively, let’s review the basic “features” of each delivery method.

Design-Bid-Build
Design-bid-build, sometimes known as “hard-bid”, involves a compartmentalized approach, with the architect and engineers being hired to produce a complete a set of design documents prior to the involvement of the general contractor.  The general contractor then takes this information and, after supplying the client with a lump-sum amount to accomplish the work, builds the project to the scope and specifications outlined by the documents.

When to use this approach (typically)

1. Cost is more important than schedule.
2. Opportunity to be open to all

What are the pros and cons of this approach?

Pros

1. Usually provides a lower price for the owner
2. Allows more contractors to bid the project

Cons

1. Longer procurement process as bidding is done only after the drawings are completed
2. Low bid has the tendency to increase change orders and be more adversarial
3. Pricing done by estimators who may not use the sub market as much as a General Contractor
4. No constructability review by a contractor.  Staging and coordination issues may not be thought through.
5. “White knuckled landing” on pricing in the open market.

Construction Manager/General Contractor
CM/GC involves the contractor at an earlier stage of the project, usually beginning in schematic design or early design development phase.  This early involvement of the contractor is predicated on a collaborative approach, whereby the contractor is working side-by-side with the client and the architect to input best practices and value into the design.  It relies on the expertise of each team member to inform the design of the facility so as to enhance its scope in a practical and value-conscious manner.  Once the architect has produced complete design documents, the contractor typically provides the client with an overall price – otherwise known as a Guaranteed Maximum Price (GMP) – to construct the project.

When to use this approach (typically)

1. Complex projects, ie. Staging issues, crane issues, move coordination phasing.
2. Projects with significant site work that could be begun early (Grading and site package)
3. Projects with tight timeframes

What are the pros and cons of this approach?

Pros

1. Better experience as a Team approach is used.  Open communication and “books” should be expected.
2. Reduced quantity of change orders is common.
3. General Contractor input on the schedule.  Schedules can provide detail that allow owners to prepare for events that impact them.
4. The GMP can be established prior to completion of the plans and specifications to allow for an earlier construction start.
5. If the costs are less than the GMP, the Owner receives 100% of the savings benefit.
6. Bid to subcontractor market which could allow for local involvement and hand picking of certain contractor

Cons

1. General Contractors will bid to a smaller pool of contractors that they have relationships with.  This reduces owner risk, and theirs, but may not produce the lowest price.
2. Contractors may opt to self perform work which would not be bid in the market.

As the projects move forward we will benchmark against the pros and cons to determine what is true and what is not in regards to pricing, schedule, and experience.  Please note that there certainly other delivery methods that are utilized such as design-build and Integrated Project Delivery, these will be discussed in future blogs.

Assessments are intended to openly discuss each major building component and determine a plan for maintenance or replacement for that component. Within each component are numerous parts and pieces that need to be maintained properly in a systematic approach. Nothing lasts forever, but with proper preventative maintenance, the remaining useful life of any building component can be extended.

An assessment report includes an evaluation of the overall condition of the property and provides many useful recommendations. The combined components become itemized in a spreadsheet allocating future capital expenditures over any give term; the reserve study. This assessment/reserve study will summarize the projected expenses to determine specific capital exposure of the property and allow the owner to determine a course of action; maintain, replace or rehabilitate. A replacement reserve report will also reconcile the reserve funding or capital costs with the projected operating income and expenses. Knowledge of these costs will help the owners or the property manager to properly forecast expenses in order to manage the bottom line.

The reserve study portion of the assessment is a comprehensive financial report of major components that will require repairs, restoration, maintenance or replacement within the next 20-30 years. As a comprehensive report of major common element components, it acts as a road map for planning the community association’s budget, meeting all legal, fiduciary and professional requirements, minimizing the need for special assessments and enhancing property resale values.

Preventative maintenance provides the most benefit to the property and residents. When Preventative maintenance is used consistently, resident service requests decrease, turnovers are simplified, equipment life increases, and outside agency inspections become easier to pass. Preventative Maintenance pays but initially it isn’t easy and it may not be cheap, but the “Pound Of Cure” costs much more in the long run. The benefits of solid Preventative Maintenance quickly becomes evident in your property, staff, residents, community and ‘bottom-line’. An in-depth look at switching from a “Reactive” to “Proactive” Maintenance program that lets you take control of maintenance instead of it controlling you.

A property condition assessment will also help to identify and provide solutions for any deferred maintenance. This type of maintenance is normally curable physical deterioration that should be corrected immediately or preventative maintenance added to prevent any further deterioration of the component. If not corrected, the deterioration will get worse and the component will require a costly replacement before its usual and customary estimate useful remaining life is exhausted. Knowledge of this information will also allow the owners and or the manager to improve the overall appearance and increase the income and property values.

Project Management/Owner’s Representative services performed during the building or renovation process does not stop at the end of construction or after obtaining the Certificate of Occupancy. There is still the management of the facility and all the related components. Many owners hire building engineers or maintenance personnel to maintain the property, but most lack the tools associated with the proper understanding of preventative maintenance as it relates to extending and preserving the useful life of each component, unfortunately most do the minimum and react when building systems fail.

Wember Inc. attempts to broaden the definition of Owner’s Representative into a full service third party consultant for property owners. In the past the Owner’s Representation scopes of services ended at the completion of the project, extending Owner’s Representative services throughout the life of the asset, beginning with an assessment and ending when the structure is sold.

Wember will be publishing blogs, Tweets, and other communication to keep existing and prospective clients aware of new trends in the industry. This blog is the first of a series discussing the intricacies of the assessment division at Wember Inc. and our value added services.

Much time was spent discussing the programs intention and future.  At this meeting it was presented that the sources that fund the BEST program including the Colorado Lottery and Land Trust Reserve are seeing significantly reduced revenue which in term impacts funds available for the BEST program.  The lottery funds are anticipated to be $0 his year when normally they are projected to be $2 to $12 million.  Causing the drop in funding is a lack of large jackpots and increased expenses.  The land trust is also reporting increased expenses and lower income due to a coal mine in Routt County reaching the end of its production life and oil and gas revenues being down.  The board has asked that the organizations present at the next meeting to help them understand the upcoming funding stream or lack thereof.  No discussions reflected that this news would impact the funding of the projects that are being proposed in 2010.

The second part of the meeting shifted to the Statewide Facility Assessment.  These assessments were completed by Parsons who took on the monumental task of reviewing 5,500 (130,000,000 sf)  facilities across the state.  The review included approximately 215 key items per building.  At this point there is a strong need to resolve some health and life safety issues in the schools.  The BEST program is working on a 1-5 ranking (1 most needy) system that allows the reviewers to understand the critical nature of projects being submitted.  These rankings will become a critical component to the program.  The BEST members and staff light heartedly presented the fact that they do not want the program to turn into the BEST roof replacement plan. 

The final part f the meeting included the serious issue of operational costs that come along with building a new facility.  The BEST members addressed their concerns regarding how the facilities will be managed upon their completion.  It was discussed that as part of their submission schools should provide reserve/replacement studies for their projects to identify capital expenditures that will impact their bottom line as the buildings age.  Schools will also need to supply a maintenance plan.  Finally submitting parties should attempt to prove their ability to manage capital funds and a have a plan for allocating capital funds on the new projects.

Where could this be going?  Wember Inc. believes that although the goal of the BEST program is to replace old buildings with new as a preference the comment of turning into a roof replacement plan may be closer to the truth.  The fact that the review committee will be forced to prioritize buildings that have health and life safety issues will consume major portions of the funding and put large new schools at a lower ranking.  More stringent requirements for submissions to prove they have they have the ability to manage the facilities upon completion is another added hurdle.  Although the BEST program clearly does not want to throw money at old buildings that should be replaced they must consider the fact that not all schools can find a way to come up with a match on a large projects and will opt for the repair.  The BEST program will have a hard time saying no to a health issue in our opinion.  If you are submitting note that the selection committee stated that the hardship letters this year need to be more unique as all can easily say that health care costs have increased, sales tax revenues are down, and insurance costs are up.  What makes you unique, hopefully a life safety issue.

The meeting was standing room only with the board members and BEST staff compressed in the center of the room.  The meeting began with typical housekeeping and then went into of the North Routt Community Charter School project which was awarded $3.1 million to help fund the new school in Clark.  The awarded funds would cover 65 percent of the $4.8 million total project cost.  The BEST program required that NRCCS come up with a matching amount of 35% for the proposed 12,200sf school.

The school began their presentation with Colleen Poole, Director, acknowledging that they were on the ropes as they were short on matching funds but still hoping to break ground in March, they believed they had a solution.  Her team presented a Power Point of their current facility with images of students gathering in yurts buried in the snow and a residential kitchen overwhelmed by a lunch program.  The presentation went on to address the situation of matching funds with the school currently receiving donated land, $500,000 from a state Department of Local Affairs, $200,000 grant from the Denver-based Gates Family Foundation, and $60,000 from donations among other funds.  As the school did not meet the requirement for the matching funds they procured a line of credit to close the balance.  The board raised many points including that Denver’s Legal department would not approve this particular line of credit as it is in direct violation of Tabor.  They also stated that land donation did not apply to the matching funds, and suggested that the DOLA grant would not count as it is not cash in hand as it too is a matching fund.  After an emotional discussion from the board and the BEST Capital Construction Assistance team the board voted unanimously to withdraw their recommendation for the NRCCS new school BEST Lease-Purchase Grant.  The Mapleton School also suffered the same fate as their bond failed to pass this fall.

The lesson learned from this meeting was when applying for a grant you must be sure you understand all that is required of you in order to meet the guidelines set forth by the BEST program and make sure you have allotted ample time to accomplish those requirements.  If required to have all the matching funds available by a particular time, then you must have cash in-hand, not just pledges.  It is great that you have people who have pledged donations, but you need to have the actual cash in-hand for them to count.  Also, you need to check the requirements of the other grants you may be receiving.  They may also require matching donation and may also have limitations on where those donations come from.

The meeting went on to discuss the ranking of projects and how they are working to prioritize projects by health and life safety.  Wember Inc. will discuss this in our next blog in this series.