Kleinfelder CEO Talks Risk Transfer, Infrastructure Needs
[Risk transfer] is not a new thing, but we are seeing it continue to be more and more of an issue for the industry. If owners can find a contractor and engineer that is willing to sign up for taking all the risk, why wouldn't they? If you are an owner, why wouldn't you do a project where there is no downside and only upside? The problem is, especially when times are slower, engineers and contractors want the work, and I think there is a natural tendency to accept less desirable contract terms and project risks when times are slower.
ENR CA: What is Kleinfelder's position?
Siegel: The best way I can describe Kleinfelder's position is that we always try to look at the overall risk of a project before accepting it. Sometimes we will take a calculated and measured risk because we feel that the reward of working on the project is worth it. But there are times when we don't pursue projects because we perceive there is far too much risk.
A good example for us might be the fact that we really don't do any single-family residential work anymore. It's not that we didn't appreciate the market and the people working there, but we found that the incident of litigation and lawsuits around single-family homes was so high that we were spending far more in lawyer fees than we ever made on any of the projects we worked on. It wasn't worth it.
ENR CA: Are you seeing any new trends in the industry?
Siegel: I network a lot in the engineering and construction industry and I've heard that owners have done a good job procuring design-build projects. They see the benefits of this and they get it. But a lot of owners still want to dictate the details of the design and provide significant input and changes.
But design-build teams feel like they've bid on a project based on the design they were given, and if the owner wants something different it should be a change order. There is a growing frustration among design-build teams that owners are procuring via design-build, yet they want the same level of involvement and dictation of the final design that they would get in a more traditional design-bid-build environment. That sets up a conflict, and I think we are seeing that in the amount of change-orders and disputes that are occurring on design-build projects these days.
ENR CA: What is the solution to this problem?
Siegel: The solution is easy to say and harder to do. Either you go with design-build and appreciate the positives of speed of contracting and delivery and the negatives of less control over the design, or you stick with traditional design-bid-build, which takes longer but you get exactly what you want. The two just aren't compatible. You can't procure one way and manage a project another way, so the solution is to be consistent in your procurement and management of project.
We are comfortable doing design-build but as engineers we actually prefer design-bid-build because that gives us the opportunity to work with the client and make sure they get exactly the project they want at the end.
ENR CA: What changes do you see in the industry over the next five years?
Siegel: In the next five years I see the use of remote sensing, drones and advanced computer programs that will do a great deal of the work now done by staff in more labor intensive manners. As an industry, we have to get our heads around these changes and make sure we stay in front of them, because the technology is marching forward. If we don't stay in front of it, we run the risk of getting run over.