The Rest of the Story…Part 3

After my client and I came to a decision on Delivery & Contract Methods to be used for his capital project, I proceeded to tell him that every project is Planned, Designed, and Implemented, but not always in that order. I learned this lesson several years ago as I was building my home. The house was nearly complete when the contractor showed up with a backhoe. He dug a hole out front of the house and filled it with concrete. This was to be the footing for the masonry base to the yard light. When the landscaper saw the location of the foundation, he said “The yard light needs to be 4’ closer to the house so that it can be integrated into the landscape bed”. As you would expect, we excavated out the concrete foundation and moved it to the exact spot the newly established “Plan” called for.

Your probability of success is always low when you start construction before you know what/why you are building or when you spend effort designing things that end up not being a part of the project. So, on your next project:

  • Plan: Establish where you want to go and how to get there
  • Design: Determine what pieces of your project need to be designed and documented in order to communicate the plan to all the stakeholders.
  • Implement: Never start building before you know what you are building and how you are building it.

…and ALWAYS do it in that order. Remember a good Plan, well Designed & Detailed, is easy to Implement.

PDMi is ready to help you with your next capital project. From determining the Delivery & Contact Methods to Planning, Designing, and Implementing; we can be the “arms and legs” that will make your project a success. Give me a call; we want to go to work for you.

The Rest of the Story…Part 2

After our client (whose story we have been talking about in our last several eBits) settled on how to deliver his project, the conversation went to which type of Contract Methodology should be used. When dealing with contract types, it always comes down to Risk & Reward. The one who accepts the risk should get the reward. So, no matter which method of contract you choose, how to allocate risk and reward is the measuring stick. Here are the three basic types of contracts used to deliver capital projects:

LUMP SUM.  With this method, the Risk/Reward is the Contractor’s. The following are true about this method:

  • Costs are fixed at time of bidding
  • Schedule is fixed at time of bidding
  • High probability for Change Orders if the scope is not well defined

COST PLUS A FEE. With this method, the Risk/Reward is the Owner’s. The following are true about this method:

  • Costs are based on the project scope and passed directly through to the owner
  • All bidding, negotiations, and construction costs are “open book”
  • The fee (lump sum or percent of cost) is negotiated at the start of the project

GUARANTEED MAXIMUM PRICE (GMP). With this method, the Risk/Reward is Shared. The following are true about this method:

  • Maximum cost is guaranteed at the start of the project, based on an approved scope of work
  • All bidding, negotiations, and construction costs are “open book”
  • At the completion of the project all savings to the GMP are shared per the formula agreed to at the start of the project.

Due to the financial institution our client was working with, he chose the Lump Sum contract method. The underwriter of the loan required firm bids prior to closing and did not want to accept any risk after the contracts were executed. As with Delivery Methods, different contract methods work for different projects. Again no “One Size Fits All” answers. Give me a call and we can talk more about the truths of each method and see which method would best fit your next capital project.

Our next e-Bits I will unpack the sequencing of Planning, Designing, and Implementing a project, in the meantime- Stay Tuned for the Rest of the Story…

 

The Rest of the Story…Part 1

In our last e-Bits we told you about our client that hired PDMi to manage his capital project. At our kick-off meeting we reviewed the following standard Delivery Methods to determine which one best fit his project.

Design-Bid-Build.  With this method, the Owner enters into a contract with a Professional Architectural/Engineering firm for the design. After a competitive bidding process, bids are analyzed and a contract is executed with the low bidder. The following are true about this method:

  • Cost: Known after the design is complete
  • Schedule: Linear/Sequential
  • Relationships: Based on lowest Bidder

Construction Management. With this method, the Owner enters into two agreements for services. One with a Professional Architectural/Engineering firm for design based on using multiple Prime Contractors. The other is with the Construction Manager to manage the Prime Contractor process. The CM agreement can be “as agent” (Owner has contracts directly with Prime Contractors and assumes risk & rewards) or “at risk” (CM has contracts directly with Prime Contractors and assumes risk & rewards). The following are true about this method:

  • Cost: Known after the design is complete
  • Schedule: Simultaneously/Overlapping
  • Relationships: Negotiated team

Design/Build. With this method the Owner enters into one contract to provide both design and construction. The following are true about this method:

  • Cost: Established during the design process
  • Schedule: Versatile/Fast Tracked
  • Relationships: Trust but verify

Our client chose the Construction Management “as agent” method. His project was on a very fast track and he felt like this method gave him the best chance of completing the work on time and within budget. Different methods work for different projects and there is not a one size fits all. Give me a call and we can talk more about the truths of each method and see which method would best fit your next capital project.

In our next e-Bits I will unpack Contract Methods and the one after that we will look at the sequencing of Planning, Designing, and Implementing a project, in the meantime- Stay Tuned for the Rest of the Story…

Stay Tuned…

A client of ours has been a tenant in a facility for years. Due to the “Up-Tick” in the economy he decided it was time to purchase a building and be his own tenant. He called us and said “As much as I would like to manage the capital improvements required for this building, I know what I don’t know. I recognize I have no experience in managing a design and build project and my time will be best spent doing what brings me income – my business”. With that said he hired PDMi to manage the capital improvement project.

Our first advice to him was to do three things:

  • Determine which Delivery Method would be best suited for his project.
  • Decide which Contract Method makes the most sense financially for him and his lending institution.
  • Layout the sequence of Planning, Designing, & Implementing all the pieces and parts that make up the project.

In the next upcoming “e-Bits” I will unpack each of these and share how they impacted our client’s project. If we can help you plan your next capital Improvement project, give me a call, in the meantime- Stay Tuned for the Rest of the Story…

Why What How

At a conference I was attending, I heard a speaker say “People mostly know what they are doing and how to do it, but they often do not know why”. This may be generally true on issues we face in our lives daily, but it made me stop and think about whether this is the case with facility projects. Our experiences show that many of our clients know why they need to expand their facilities or build new ones, what they do not know is what to do and how to do it. This is where the specific process of Planning, then doing the Detail Design, then doing the Construction comes into play.

When facing a facility project you need to answer the Why – What – How questions, in that order.

  • WHY: The why question is answered during the Planning Phase of the project. The answer to the why question gives purpose to the project.
  • WHAT: The what question is answered during the Detailed Design Phase of the project. The answer to the what gives definition to the scope and quality of the project.
  • HOW: The how question is answered during the construction phase of the project. The answer to the how gives organizational context to the project.

When the process of Planning (the Why) then Detail Designing (the What) then Construction (the How) is followed you can be assured that your facility project will be a success. Give me a call; we would look forward to helping you answer these questions on your next project.