IPD, Design Build, GMP with open books.....All of these progressive and collaborative forms of construction contracts have shown great promise to minimize the difficulties typically encountered in construction projects. However, the momentum of these contract types to displace Design Bid Build has slowed down due to the realities in today's market. In speaking with many GCs lately, it is common to hear, "We don't like doing hard bids, but feel that we must as most of the opportunities are being offered this way." Not only is it mostly hard bid, but as many others have noted, there are often 20 or so bidders for each job ensuring that the price will be rock-bottom and margins for the winner will be non-existent or razor-thin.
Who is the winner in this hard bid environment? Well, the owner surely is getting a great price from the bidders, a price that can be as much as 30-percent below projected cost. But experienced owners know that these hard bids come with hidden costs including change orders, delays, and claims that end up costing them additional money. But even if that additional money were to add 20% to the cost of the winning hard bid, the owner has still realized a 10% saving over the original projected cost.
What happens in a project like this and how can a GC run a good project with general conditions and their fees needing to be "razor-thin" or possibly lower than their actual cost to win the job? And what is the potential for losing money or having other project problems such as schedule delays or safety issues with such a small crew managing the project?
Let's talk about what frequently happens in construction projects in general. A project runs along with close management and monitoring from a complete project team - PM, supers, field engineers, etc... until "crunch time" when they find that some aspects of the schedule were either not well planned or have been impacted by events that have occurred during construction.
Typically, subcontractors are arguing scope everyday and submitting work slips before agreeing to complete required activities. These events could be the usual, such as weather delays, a crew not showing up for work for a week, or a change order being processed due to a part of the building not being able to put together according to the design documents. Most often these issues can be fixed with manpower, so the GC beefs up the team on site to cover extra shifts and weekends. The subcontractors are convinced to increase crew size or work extended shifts and weekends and show up with bigger crews and work longer hours to try to finish on schedule.
There is a good deal of the "Three S's of Construction Management" (Smoking, Shouting and Swearing) going around until the project is completed. However in this environment where fees and general conditions are so low there may not be additional manpower to help the GC finish, and while the owner may give an extension of time, they are not likely to extend coverage of general conditions and now that small fee starts to get eaten up.
Another problem with this last minute rush of crews, materials and equipment is maintaining project safety when there are multiple activities going on in the same location and everyone is under a tight deadline. Adjusting the schedule by stacking the trades as the completion date nears looks easy on paper but can have disastrous consequences on site. Planning and logistics typically do not account for this as part of their baseline schedule plan and things can get bad fast!
What can 5D BIM do for the GC here to help them win? 5D BIM is a highly visual and integrated method of planning, communicating the plan, and managing construction projects. The constructability of the job can be greatly improved by having a full model built immediately after the bid is awarded, or for more progressive firms, they can build a model and produce a constructability analysis from the design documents prior to the bid so that they know where the problems in the project are before they name their bid price. The model ensures better scope identification and coverage and reduces the common "work-slip" problem between the GC and the subs. Then, a detailed review of quantities and schedule durations (based on crews and productivity) from the subs involved will allow the GC to hire subs that can get the job done on time and on bid. In addition, should the GC be forced to supplement a sub, he will have control over the T&M billings as he knows precise quantities and locations for the work let out to the supplementing subcontractors.
Subsequently, using 5D production control the GC field crew can easily produce a weekly progress report that allows senior superintendents and managers of the GC to understand where the problems are occurring or will occur in the future based on the current production rates. This allows them to take pro-active measures, as well as visually communicate to the subs the problems they are creating for all the other crews if they cannot keep up with the planned schedule for work in place.
Finally, a well managed 5D project has a complete set of highly visual documents that can support their request for change orders and claims ensuring that the cash flow from the project continues and allows the small profit to be realized.
The savings inherent in an economy such as we are in today make it impossible for owners to ignore the hard-bid methodology for procuring construction services. However, the development of Virtual Construction and BIM capabilities provides a new and proven strategy to avoid many of the common pitfalls associated with hard bid construction practice.
To learn more about this subject, we've put together a special Fridays with Vico series about hard bid scenarios. The first episode explores the role a 4D BIM schedule plays - join us on Friday, Sept. 11 @ 12 Noon ET.