Construction... it's all the same, isn't it?


     I'm sure you've all heard before from an owner, "design-build, yeah, we tried that a few years back--didn't like it--never use it again." "Oh really," you say, "why is that?" At which point you sit back in your chair and listen for an hour about how it "didn't work." But, as you listen, you are making mental notes to yourself as to how the process was poorly assembled in the first place--and what they did on the job wasn't even design-build. The process which they undertook was more along the lines of some hybrid design-assist effort which was doomed from the start as if it was a forced marriage of golfing buddies, in-laws and subcontractors which the owner "never had any problems with before." Been there?
     Although this article is not about the design-build process; it is about the importance of market development. In the aforementioned example. I will point out one of those natural human nature tendencies: generalization. We can't fight human nature, but we can try to strive for some common ground which will focus on the strengths and weaknesses of any delivery method. This, I feel, is important in helping an owner to help himself (herself). It affects the overall development, acceptance and success of any delivery process.

Historical Perspective
     In the early days of construction, the "Master Builder" concept was in place. Under this model, the entire construction process was headed by one person, the Master Builder, who oversaw the entire design and construction process. Then, over time, the roles of the design/architect team grew further and further apart from that of the construction team -- at times creating an adversarial relationship. Problems were associated with this distancing. Thus, because the end user was more interested in the final product, the method by which the construction team got there was of less importance. Hence, for reasons of scheduling, quality, logistics, fiscal policy, etc., they (the owners) have come to the conclusion that "maybe there is a better way to do this than what is presently on the mark." That sounds something like "market driven" doesn't it?
     So what are all these delivery methods I've been talking about?
     Specifically, [they are] the variables for the delivery method(s) and financing, design, construction and project ownership. I'll start with a simple example relating to our introductory story; then I will list a number of permutations. Remember, it is important to focus on the advantages and disadvantages of the end user and not how we get there.
     In the introduction we talked about design-assist. First, design-assist can begin at any stage from the beginning to the end of the design. Using the other variables listed, one my still ask the questions: 1) How is the process going to get paid for? 2) Is the architect contracted by the owner or the contractor? 3) At what point in the construction process was the contractor brought on board? And 4) is the owner going to own the building or is it going to be a lease-back situation? The point being that with each permutation of the aforementioned variables, different results (using the owner's definition) are achieved.

Construction Management
     Under this model, the construction manager works under the terms of agency law as an agent to the owner. As CM, there is no risk on the part of the person performing it, and the main focus is on programming and acting as a conduit for the owner to assure that their expectations are met. But within the industry there are terms which people inaccurately use interchangeably: CM at risk, CM/GM under a GMP contract, Architect/Engineer team acts as a CM, two-phase contract with CM doing pre-construction and GC working under construction contract.

Design-Build
     There is true design-build in which the Architect/Engineer team works for the Contractor. Design-Assist is also many times referred to as Design-Build, even though the contractual relationship of the A/E still remains with the owner. Other possibilities include: 1) Design-Build Leaseback, 2) Design-Build model in which the A/E still reports to the owner, and 3) GMP contract at some level of design completion-with remaining design and responsibility assigned to the Contractor. The list is endless--the point is that they all have their advantages and disadvantages.

Financing
     Projects may have conventional financing: 1) pension funds, 2) life insurance funds, 3) equity financing, and 4) participative debt. Non-conventional methods would include both tax exempt and non-tax exempt bond financing.

Ownership
     As developer/contractor, a firm may own a building outright and lease it back to a client, s/he may have a participative role in the ownership, or may only have a lease-hold estate as part of their overall compensation. Through ownership, developer/contractors have experienced a number of revenue generating activities which were previously not part of their everyday business activity. Examples of this include parking revenues, property management revenues, tenant improvement revenues, etc.
     In closing, it is not the purpose of this article to be a definitive glossary of possible delivery methods, but its purpose does lie in our responsibility to server our client base. Alternative procurement methods do not stem from strengths in the market place, but from weaknesses. Our challenge as an industry will be to help develop, sell and implement the products that our clients want. Thus, it is important that we properly communicate those products.

Call (772) 285-5212 or E-mail: john@jahockey.com
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