The Search for a Better Mousetrap
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The construction industry is always looking for a better mousetrap. For much of the past 20 years, that better mousetrap has come in the form of variations on project delivery. Concepts like construction management, program management and design-build have risen or been popularized as panaceas, or at least better than the traditional design-bid-build approach that dominated American project delivery for decades. But owners increasing demands on their project teams and the growing interest in integrated modeling and green building have elevated these alternatives to the point where they have begun to eclipse design-bid-build. Some say they should no longer be considered alternative, but merely varieties of what now is the mainstream.
For many firms, this means being equipped to provide a broad palette of project-delivery options. “We provide ten to twelve different models of project delivery,” says Garry E. Nunes, national director of construction services for PB Americas Inc. He notes that Parsons Brinckerhoff reorganized last fall to combine Parsons Brinckerhoff Quade & Douglas, its project design group, with PB Construction Services, its construction group, to better facilitate the interchange of design, contracting and management skills for clients.
Related Links: The growing interest in alternate project delivery can clearly be seen in the near frenzy of acquisitions of construction-management and program-management firms. Parsons Corp. last year acquired 3D International, a Houston- based old-line program manager, and developer/CM firm Trammel Crow was acquired by property developer and manager CB Richard Ellis.
Dutch-based Arcadis has been one of the most active purchasers, both in the U.S. and abroad. In 1994, it acquired construction and program management firm Construction Dynamics Group, Columbia, Md., and AYH plc, a London-based project management and cost consultant. In November 2006, Arcadis acquired Tempe, Ariz.-based program management firm PinncleOne. “Arcadis has about 1,200 people in construction and program management worldwide,” says Larry Zimmerman, senior vice president of Arcadis US’s CM/PM business practice division. “CDG focused primarily on the municipal market, but the acquisition has given us entry into markets we haven’t been.”
Another firm that has been active on the acquisition trail has been Heery International. In 2005, it acquired Los Angeles-based CM firm JCM Group. Then last year it acquired Dallas-based CM at-Risk specialist Charter Builders. On May 9, it announced that it had acquired Sequeira & Gavarrete, a Miami-based hispanic-owned program management firm. Sequeira & Gavarrete is program manager on the $300-million Miami Intermodal Center Rental Car Facility and is one of the program managers for the $2.6-billion North Terminal Development at Miami International Airport.
“It’s not like we swooped in from out of nowhere to buy a bunch of people,” says Jim Moynihan, CEO of Heery. “We already had 60 people in offices in Florida, including 15 in our Miami office, and had worked with S&G for the past two years. We worked well together.”
No project delivery type seems to be growing faster than program management. In this booming market, owners increasingly are facing challenges to put up larger programs faster with existing, or even a shrinking staff. “We are seeing a major shift in the types of people representing owners,” says Lief Selkregg, CEO of The Rise Group. “There’s been a huge shift in the owners’ reps to the business and finance side, with fewer people with construction and engineering degrees,” and they need expert help.
Selkregg also says as the projects increase in size, supervision is moving up the management chain at owner firms, often to the level of chief financial officer or chief operating officer, or even the CEO. This means owners are putting increasing reliance on outside expertise not just in executing a project, but in the conceptual and planning stages.
The increasing emphasis on the business and financial side of the building equation has led owners to more closely examine the costs of a facility throughout its usable life. “The green building movement has led to increasing oversight about facility operating costs from higher levels,” says Selkregg. He says that program managers can bring expertise on facility lifecycle costs to the owner. “We now have effective reliable metrics for assessing lifecycle costs,” says Selkregg.
Some top industry executives see green building working against design-build. “Design-build still is getting a lot of play, but it takes longer to get a firm price on a design-build project,” says Gui Ponce de Leon, CEO of PMA Consultants. “With all the variables in a LEED [Leadership in Energy and Environmental Design] project, it is doubly hard to price a project,” he says.
Some in the industry are looking down under for new project delivery options. For several years, leaders in CM have been watching with interest a new concept called “alliance contracting” in Australia. Black & Veatch is in such an alliance on a $150-million contract to conceptualize, design and build the first phase of a waste-water-to-potable-water treatment plant for the government of Queensland, Australia.
“Under the contract, we are equal partners with the government of Queensland and the contractor, Thiess [South Bank, Queensland],” says Amy Shanker, B&V executive vice president of the water group. The Bundamba Advanced Water Treatment Plant will convert about 5.2 mgd of wastewater to potable water for industrial and agricultural uses, and is scheduled to open in August after only 11 months from the initial concept. The $160-million second phase of the project will add another 20.8 mgd.
“We have an Alliance Leadership Team that makes all the final decisions on the project,” Shanker says. He notes that this is a shared risk-shared reward arrangement where Thiess and B&V risk only their overhead and profit, but can share in the benefits. “This is a fully open-book arrangement,” he says.
Shanker believes the concept should be tried here. “An alliance contract is unique in that it developed in a no-blame environment. This is unheard of in the U.S.,” he says. But he believes the concept could be adopted. “It would have to be adapted to U.S. practices, but I think it would work well here,” he says.
