Of course, some will argue that we need the low-bid system. The problem is they are wrong. Others like Barry LePatner in his book, Broken Buildings, Busted Budgets will argue that what’s needed is greater competition and tighter contracts. They are wrong, too.
What’s needed is American Innovation. The problem with design-bid-build is it stifles innovation. I was at a conference where an owner was asked why he went with the design-build delivery method. His answer was, “Because we got a better design from the contractor than our engineers.”
The reality is that in all industries, innovation is what separates the competition. Design-bid-build eliminates most of the opportunities a contractor has to innovate. Of course, the contractor can find better ways to install the bricks and mortar based on the plans and specifications, but the real opportunities occur at the beginning of the design process.
Oregon State University Associate Professor stated in a New Construction Strategies radio interview that innovation thrives much better in an integrated project-delivery environment because it’s more collaborative, and innovation thrives in such an environment. However, the key is that the collaboration must begin at the beginning of the design process, where it has the greatest impact.
Some would suggest the contractor can always make suggestions after the bid is awarded. The problem with this approach is the contractor with the best ideas might not be at the table. Also, once the plans are completed and construction is ready to start, the cost of making the changes often wipes out any construction savings because of delays and other costs outside of the contractor's control. A major advantage of the design-build process is its speed, which can translates into huge cost savings.
After the St. Anthony Falls Bridge collapsed in Minneapolis in 2007, they replaced it using the design-build approach. During an interview with Jay Hietpas of the Minnesota Dept. of Transportation, I asked, why did you use design-build? He responded, because the day we opened the new bridge we would have gone out for bids if we had used the design-bid-build approach. Time was of the essence; since it was costing the tax payers $400,000 a day in extra transportation costs alone. In fact, design-build’s rapid schedule saved more travel expenses than the cost of the bridge construction, so in essence the bridge was free. Despite this fact, there are still those that focus only on the contractor’s cost. Maybe they would have received a lower bid, but it would not have generated a lower cost when all factors were considered.
Looking at the process from purely a project management perspective, we obtain similar results. The best way to reduce construction costs is through project planning. However, to get the best results from planning, it must start at the beginning, not halfway through the process.
Professor Barbara Jackson at Cal Poly at San Luis Obispo states that the construction team is the master builder of today. Projects are too complicated for a single person or even a single discipline to attempt to make all the decisions.
One of the problems implementing an integrated project-delivery approach is the false belief that the process works best on simple projects. In reality, it’s the opposite. Simple projects are conducive to design-bid-build because everyone agrees on how to do it. The more complex a project is, the greater is the need for collaboration between all the team players.
Of course, we need some controls. But contractors should be rewarded based upon performance, and construction costs is part of that evaluation. A low bid at the expense of higher total project costs is a false savings. Even so, some people believe that the low-bid approach is necessary to create competition. But that’s not true, because unless you reward what you want, you aren’t likely to get it. If you want peak performance, you must reward it, not the low bidder. Imagine what would happen to Olympic times if the gold medal was awarded to the runner who practiced the least, instead of who ran the fastest?
What’s needed is American Innovation. The problem with design-bid-build is it stifles innovation. I was at a conference where an owner was asked why he went with the design-build delivery method. His answer was, “Because we got a better design from the contractor than our engineers.”
The reality is that in all industries, innovation is what separates the competition. Design-bid-build eliminates most of the opportunities a contractor has to innovate. Of course, the contractor can find better ways to install the bricks and mortar based on the plans and specifications, but the real opportunities occur at the beginning of the design process.
Oregon State University Associate Professor stated in a New Construction Strategies radio interview that innovation thrives much better in an integrated project-delivery environment because it’s more collaborative, and innovation thrives in such an environment. However, the key is that the collaboration must begin at the beginning of the design process, where it has the greatest impact.
Some would suggest the contractor can always make suggestions after the bid is awarded. The problem with this approach is the contractor with the best ideas might not be at the table. Also, once the plans are completed and construction is ready to start, the cost of making the changes often wipes out any construction savings because of delays and other costs outside of the contractor's control. A major advantage of the design-build process is its speed, which can translates into huge cost savings.
After the St. Anthony Falls Bridge collapsed in Minneapolis in 2007, they replaced it using the design-build approach. During an interview with Jay Hietpas of the Minnesota Dept. of Transportation, I asked, why did you use design-build? He responded, because the day we opened the new bridge we would have gone out for bids if we had used the design-bid-build approach. Time was of the essence; since it was costing the tax payers $400,000 a day in extra transportation costs alone. In fact, design-build’s rapid schedule saved more travel expenses than the cost of the bridge construction, so in essence the bridge was free. Despite this fact, there are still those that focus only on the contractor’s cost. Maybe they would have received a lower bid, but it would not have generated a lower cost when all factors were considered.
Looking at the process from purely a project management perspective, we obtain similar results. The best way to reduce construction costs is through project planning. However, to get the best results from planning, it must start at the beginning, not halfway through the process.
Professor Barbara Jackson at Cal Poly at San Luis Obispo states that the construction team is the master builder of today. Projects are too complicated for a single person or even a single discipline to attempt to make all the decisions.
One of the problems implementing an integrated project-delivery approach is the false belief that the process works best on simple projects. In reality, it’s the opposite. Simple projects are conducive to design-bid-build because everyone agrees on how to do it. The more complex a project is, the greater is the need for collaboration between all the team players.
Of course, we need some controls. But contractors should be rewarded based upon performance, and construction costs is part of that evaluation. A low bid at the expense of higher total project costs is a false savings. Even so, some people believe that the low-bid approach is necessary to create competition. But that’s not true, because unless you reward what you want, you aren’t likely to get it. If you want peak performance, you must reward it, not the low bidder. Imagine what would happen to Olympic times if the gold medal was awarded to the runner who practiced the least, instead of who ran the fastest?
Ted Garrison is a construction industry expert and civil engineer with more than 25 years of construction experience. During the last 12 years, he has authored Strategic Planning for Contractors and co-authored five other books on marketing, sales, customer service and leadership. Garrison also is the host of the Internet radio program, New Construction Strategies, www.NCS30.com, where he conducts weekly interviews of experts within the construction industry. He can be reached at Ted@TedGarrison.com or you can follow him Twitter @TedGarrison
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