Fast-track? Design-build? What the Salesmen Don't Say
There are salesmen in our industry who sell their clients or acquaintances on a project delivery method that is the most expensive in construction today. They say you can have your project sooner. They say the method has few risks. They say it will save money. Their clients want to and do believe them. Then the same clients find out they have a mess on their hands that can take longer and cost far more than they ever contemplated.
 Short |
The salesmen sell fast-track, design-build and/or multiple prime contractors as productive and cost effective project delivery methods. I would rather sell snake oil and look at myself in the mirror than advocate any of these as the most effective delivery methods.
The construction process in the United States is based typically on competitive bidding projects I would refer to as design, bid and then build for the delivery process. In this process the architect and/or engineer is retained to design the project. The designer will submit preliminary and draft versions of the design to the owner for review at three or four milestone points of the design process. Once the final design milestone is reached and once the reviews are completed, the 100% plans and specifications are issued to the bidders. Competitive, firm prices are received from the prime contractor bidders and typically, though not always, the lowest bidder is awarded the project. Upon award, the low bidder then proceeds to build the project using its own forces and subcontractors. During the course of the project there may be change orders or disputes but, as a general rule, this is the most economical and expedient way of performing construction. This is the most competitive, cost-effective method of construction for all parties involved in the construction process.
As an estimator I deal with construction costs on a daily basis. These costs are estimated (pre-bid) and actual (cost feedback). I also have to know and understand the technical specifications and contracts. As a construction expert and arbitrator in construction disputes I get to see the results of the various contracting methods. Most of the disputes I have been involved in as an expert or as an arbitrator involve contracts that have multiple prime contractors or were done on a fast-track, design-build basis.
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I see architects attempting to be construction managers selling their clients on the multiple prime contractor approach for a project. They claim their services will save money because the prime contractor mark-up on subcontractors is being saved. Their pitch (oopsmake that sales tool) is that while the general contractor will mark up subcontractors by 8%, the architect's fee will be only 5%. Never mind the fact that prime contractors rarely, if ever, get an 8%, let alone 5% mark-up on subcontractors.
Another sales pitch is that construction can get started right away. The design can be completed for the earthwork so the sitework can get started early. Then they can complete design for the site utilities so they can be bid and awarded. Next they can design the footings so they can be installed before first frost and the project will not be delayed until spring. Never mind the fact that none of the contractors will have a contractual relationship with one another and that the architect will absolve itself of any responsibility for coordination, let alone for interference between rushed design features.
I see what I can only describe as promoters selling their clients on design-build, fast-track as a way to get operating income from plants or facilities sooner. I see them use optimistic, unrealistic construction cost projections without any basis in fact. The projections maximize the potential profits of the project should it get started and then completed six months earlier than any reasonable timeline. Don't bring up that no one will bother to verify the information for whatever reason.
I see construction management firms avoid the delicate subject of how a guaranteed maximum price contract is not really a guaranteed maximum price to the owner. I also see them telling the client the reality of the cost overruns and the client refusing to believe them.
Plant and facility owners who start the fast-track, design-build process will end up paying more than other delivery methods and likely not get any significant time savings on the project. Once they start this process they will pay more for design fees and construction services than any other method. The premiums they pay over the other methods will be substantial.
Don L. Short II is president of Tempest Company, an Omaha, Neb.-based consultant, and an estimator certified by the American Society of Professional Estimators. He can be reached by phone at 1-888-334-3332 and by email at donshort@tempestcompany.com.
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Comments
Nov. 1 , 2006
I think Don's opinion about fast track DB is completely wrong. What about all the other projects that were administered through the DB delivery method and were successfully completed? Maybe the process is best suited for certain types of projects. Better still, maybe the problems that plague fast track DB project delivery method are due to lack of understanding of the process and how the contract should be administered.
The design-bid-build method of project delivery is plagued with problems and we all know that. The relationships between the parties involved tends to be adversarial. This process costs more with respect to budget and schedule. I think Mr. Short should review projects that have been completed recently by both DB and the traditional method of project delivery and see what the census indicates before disqualifying DB as a superior method over the traditional design-bid-build process.