Beneficial Use?

Part 1 can be found here.

The traditional way to implement a project is by Design-Bid-Build. A design team, composed of architects and engineers, produces design drawings and (in many cases) project specifications. These are contract documents, essentially the defined scope of work to implement the entire project. The contract documents are then published for general contractors to bid upon and deliver a bid price. General contractors solicit bids from subcontractors that specialize in various trades necessary for the project. The general contractor’s bid is a summation of the lowest priced subcontractors and their overhead and profit. Although many award criteria can be used, the most common deciding award criterion is lowest price. The lowest price gets the job.

The Design-Bid-Build method will deliver the lowest first cost for any given project. However, the first cost is not the final cost. The final costs are what the owner pays after change orders to the contract. In this model, the final costs can be significantly higher. This design-bid-build method creates an incentive to reward contractors who take a narrow view of the scope and always interpret inconsistencies in the design documents to their advantage. In the worst cases, this can lead to Idiot Contractor Syndrome in which every item not specifically addressed in the documents is assumed not to exist. There is no reward for a knowledgeable contractor who adds in scope of work to cover items that are needed, based on his experience, but not called for in the documents. Thus the best choice may not have the lowest first price. Because all of the items not specified will be added as change orders, the final price will be higher.

Design-Build

One method of avoiding this problem is Design-Build.  In Design-Build, the contractors teams with the designers to produce a final price for the work. This method eliminates the change orders as a problem of drawing and specification errors – the contractor is involved throughout the design process and uses their knowledge and experience to make sure that items are properly covered in the price. Thus Design-Build reduces price risk from change orders. However, it is not a panacea.

Design-Build works best when the finale product is very well defined. Design-Build reduces risk of change orders due to designer error but can increase an owner’s exposure to owner initiated change orders. In the best cases, the owner negotiates directly with one contractor-design team. The design team then determines the owners needs and the owner gets to revisit the projects parameters as the design proceeds. In many cases, Design -Build is a competition between several teams of contactors and designers. Unless the owners needs are very well specified in this competition, the bids may not reflect the same exact project – and the lowest price may not represent the owner’s expectations. In the case of Design-Build competition, we recommend that a professional design team produce a scope document defining, in as much detail as necessary, the owner’s needs and wants. This allows apples-to-apples comparison of prices.

Guaranteed Maximum Price

GMP, VE, DB

The nature of a Design-Build contract is often Guaranteed Maximum Price, GMP. A GMP contract says that the final costs for the project will not exceed a fixed amount. This method  of contracting allows for the contractor to provide value engineering (VE) to the project specifications and share the saving with the owner. Value engineering can be as simple as finding an equal product for less money. In some cases value engineering means the owner’s wants are sacrificed to reducing costs. Value engineering covers a broad range of reducing costs, some of which may be unacceptable to the owner. Caution should be exercised in any situation in which a contractor can “promise” a certain amount of VE -to achieve the savings proposed may change the nature of the project.

If an owner negotiates with a contractor and design team for a Design-Build approach, there is always the concern that the owner isn’t getting the best price.  To reduce this risk, the contractor may “open book” the work. In some cases the general contractor will bid each of the major subcontractors (for example, concrete and steel) and charge a fixed markup on the selected subcontractor. This provides some assurance that the price is as reasonably low as possible. Such a method works best with general contractors that do not “self perform” work – that is, they use subcontractors for the major portions of the project. A general contractor that self-performs work is essentially competing with sub- contractors – and there is a risk of unfair competition.

A new twist on the GMP is the GMP competition. In this case, the design may be partially or substantially complete. Contractors are invited to provide GMP prices to implement the work. Depending on the amount of design provided, the contractor may have to hire a design team to complete the design prior to construction. One disadvantage over negotiation with a single contractor is the loss of contingency. In a negotiation, the contractor is very likely to carry contingency to cover problems in the construction process. Typically this contingency is a line item that is used as issues arise and the excess returned to the owner at the completion of the project. In a competition, however, such contingency is counter to the lowest price and the owner must carry his own contingency.

A GMP contract can be line item or overall. A line Item GMP has estimates for each major trade on the project. In some cases the line items can be very specific – down to individual room finishes. This type of GMP is useful for fast-track projects – projects that are under construction and design at the same time. For example, a shell building under construction and the Tenant Improvement (TI) is in design. A line item GMP allows the contractor to track each design decision as it’s made to see if the budget will be affected. If only the bottom line is important, then an overall GMP is fine – the total contract amount stays the same even if “horse-trading” between line items is necessary to compensate for construction issues.

One new twist on the GMP is a way of defining change orders and their responsibility. The contract is setup in such a way that some types of design errors are simply not allowed as change orders. For example if a ceiling light is shown without a wall switch, the switch is not a change order because a competent contractor would know that a switch is required. In a similar vein, if roof drains are shown without water leaders (drain pipes) the drain pipes would not be a change order – the competent contractor should know that the water leaders are required. However, if a beam shows five bars instead of six bars, the additional bar would be an owner-paid change order because a competent contractor would not know that the extra bar was required without re-engineering the structure. This contract method works but is problematic: the owner assumes a kind of immunity for change orders – assuming that errors will be in the first category, not the second. If this contract type is the result of a GMP competition, then the owner’s expectations are raised too high and the contingency is not in the contract – it is only in the owner’s hands.  Therefore, like Design-Bid-Build, the owner is carrying all the contingency. However, the owner is also under the impression that many of the change orders are eliminated. This is in some ways the worst of all worlds: the owner has a contract that is labeled a GMP but really only provides a portion of the assumed protection associated with the typical contract style.

What style is best for the owner? It depends on the type of owner. If you are a newbie, an owner that rarely develops buildings, we would recommend a Design Build approach using a well defined scope document prepared by a competent design firm (Like us!). If you have a preferred contractor, you can directly negotiate with them. If not, a Design-Build competition would be best. Experienced developers can use any approach – but we still recommend Design-Build. If bidding, we suggest a select list of contractors that are vetted for compatibility with the owner’s needs, wants and, to some extent, personality.

As for a contract, we recommend firat least an overall GMP contract that rewards the contractor for saving the owner money. This can be a savings sharing arrangement or other scheme.

If you truly hate change orders, then the Design-Build method with a negotiated overall GMP is probably your best bet. Note that no matter what, the owner still pays for the project and it’s beneficial use – but some methods have less stress than others.

The Essential Change Order Picture

The bane of owners, developers, designers and contractors is the Change Order. Inevitably, change orders lead to acrimony and distress among the various groups. I have recently been involved in some innovative construction contract design that has as its goal reducing or eliminating change orders.

Key to this discussion is the definition of a change order, why they occur and who is responsible for the financial impact. There are two basic types of change orders: owner initiated and non-owner-initiated. In general, the first type is requested by the owner because there has been a change in scope needed for some aspect of the project. In an owner-initiated situation, the other parties are typically not at any fault.  The other type of change order, however, is a result of some inconsistency, error or omission in the contract documents.

The Perfect Set of Contract Documents

No designer produces perfect contract documents.  The problem lies in the fact that almost all building designs are prototypes to at least some extent. Although the materials and methods are used over and over in many designs, the unique combination of the materials and methods in each building poses problems that are not all foreseen. In addition, designers are human and we all make mistakes. Thus, there are always changes necessary to implement the contract.

Some owners see the world through their own industry or occupation and thus demand that if it’s the designer’s fault that something has to change (and it costs more money, I have not found an owner yet who was unhappy when something cost less) then the designer should pay for the change’s cost. If you are a manufacturer or a sales organization, this is indeed how your world operates. It doesn’t work that way in building design and construction because it isn’t fair to the owner.

Responsibility

Finger Pointing

The comparison I recently heard was based on a car dealer’s perspective: “if I sell a car with a problem, it’s my responsibility to fix it – I don’t get to charge the customer for the fix.” True enough. But manufacturers of cars and other items have defect rates built into their costs – they expect a statistical amount of problems and charge accordingly.  If this same model were to be applied to the design of buildings, the design costs would be considerably higher. For example, if I go to a Toyota dealership and ask to buy a Tundra pickup with standard features and options, we can haggle over a price but the dealership knows how much the vehicle costs. Toyota knows what to expect in terms of warranty service because of its history with automotive design and production and a solid group of statistics.  If, however, I go to my Toyota dealership and ask for a Tundra with a V10, gull wing doors and dual rear axles, the price is going to be unknown. And so are the issues with the design. Though Toyota has the engineering skill with each component, they have never put them together in the way I just described. Toyota and the dealership would struggle not just with production cost but also with the problems to expect with such a combination of components.

For comparison, say that in the building design and construction industry, change orders due to errors and omissions average 2% of construction costs. If the designer were to indemnify the owner against these types of mistakes, then the cost of design should be higher by at least that amount or more, to insure that the designer will not lose money in the deal. As the average design fee for mid-range projects is around 6% of construction costs, this would amount to a 33% increase in design fees.

However, the 2% number is an average: some overall changes will be greater and some will be lower. If your project only has 1% change orders, the designer gets a large bonus for doing a good job. While, as a designer, I like this idea, it isn’t fair to the owner. Thus the industry uses a different model – the idea of beneficial use.

Beneficial Use

Beneficial use is the idea that as an owner, you are obligated to pay for parts of a project that are needed for the project. As an example, take an unreasonable, but simple case: If I leave off the entire third floor of your project, then you still have to pay for it to be added because you get the third floor. This despite the fact it was omitted from the drawings. In this example the beneficial use is relatively straightforward. In other cases, such as a reinforcing bar revision to meet code requirements, it may seem less clear. But you, as the owner, get the benefit of that extra bar even if you think I already specified too much.

What isn’t covered, and the designer is still on the hook for, are damages. Damages, in the simplest sense, are work and material items that would not have been required to implement the work if the error or omission had not occurred. To use our oversimplified example, you, the owner would have to pay for the missing third floor but you shouldn’t have to pay for the rework of the top of second floor columns because, if the error had not occurred that work would not have been necessary.

In my experience, the designer has to produce the best drawings possible to begin with and then carefully follow the project through construction to head off the damages portion of any changes. It should be obvious that if we need to add a piece of rebar to a concrete beam it’s the owner’s responsibility to pay for it before the pour. This is relatively inexpensive and far easier than fixing it after the concrete is poured.

“The Reno Toyota Dealership consists of a 64,000 square foot showroom and office facility as well as a 267,000 square foot vehicle storage and maintenance facility. This project incorporates a variety of building materials including reinforced concrete, steel and masonry. The service and vehicle storage area is a four story post-tensioned concrete system with concrete bearing and shear walls. In order to conceal the parking garage appearance, the building is finished with curved vertical steel trusses with an aluminum perforated screen and precast concrete panels. The showroom portion is a two story CMU shear wall building with steel joists and columns. Structural steel is also integrated into the extensive curtain wall system. The dealership was designed in phases in order to make use of the vehicle storage prior to the completion of the entire project. Construction on this project is scheduled to be completed by January 2010 and will be the largest Toyota dealership on the west coast of the United States.”

Our congratulations go out to the other project winners as well as the engineers of the year award :

• For the Environmental Category: North Virginia/Stead Pumping System Improvement Project
• For the Transportation Category: SouthEast Connector Plan Line Study
• For Civil Engineer of the Year: Robert Calloway, PE, PTOE
• For Young Engineer of the Year: Garth Oksol, PE

The structural engineers and designers at BJG have done a great job of streamlining our calculation processes.  For instance, at the beginning of each project, we always have the same information:  project location, building type, seismic and wind information, etc.  So we developed an Excel sheet that had fill in the blanks for all the information we would always use and need at the beginning of each project.  With a number of these spreadsheets around as well as Mathcad, I thought it was going to be easy to maintain my no paper calcs policy.  When I finished a calc, I would put a pdf copy into a folder, label it with a number and a description (so that the files would sort correctly) and move on.

As I went further with my calculations, I realized how much my work flow depended on using my paper calculations as a reference.  I found myself going back to change minor things, needing information, adding notes, page references.  These things were very easy with a printed off set, but cumbersome with pdf.  Not to say that I can’t change, but I found it difficult (or maybe different is the better word) to work without having my completed pieces of calculations on my desk as a reference.

Changing years of built in work flow is a large hurdle to overcome when trying to adopt process improvements such as going paperless.  This change will take me a couple of jobs to document and get right.  Currently, the jurisdictions we work with still require paper calculations and drawings for permit submittal.  With time, I am sure, and I hope, that this will change.  I would love to see the day of electronic submittals to the city in lieu of 5 stamped copies 3 unstamped and 2 sets of calcs.  Laws will have to change, workflows, etc. but that is the topic of another blog article.

Fish Springs Pump Station

Two BJG designed Northern Nevada pump station projects are built and ready to pump water to Reno area residents.  BJG performed architectural and structural design, construction support, and structural observation services for the two projects.  We were contracted by Eco:Logic Engineering to perform the work and they were a pleasure to work with.  Eco:Logic was the lead consultant on the two projects that are intended to help meet future municipal and industrial water demands for the Reno and surrounding areas.

The first constructed of the two developments was the Fish Springs water supply project.  The finished product consists of a 4400 square foot booster pump station and six 620 square foot well houses in the fish springs area 1.5 hours or so north of Reno.  The six well houses pump water to the booster pump station and the booster pump station shoots the water up over a hill and into the Lemmon Valley/Stead area just North of Reno.  Check out the fish springs ranch water project web site here.  There is almost 30 miles of 30 inch transmission main running from the booster station to the Lemmon Valley/Stead area.  Included in this building is a hypochlorite tank room that is recessed 3′-4″ for hypochlorite spill containment.  The photograph below was taken in February, it shows the pump station as it was nearing completion.

TMWA North Virginia Pump Station

The second constructed was the TMWA North Virginia pump station (seen in the photo taken a few weeks ago).  This building is located near the University of Nevada, Reno and was designed to blend in with the surrounding residential zone.  The building floor plan is very similar to the Fish Springs pump station.  Since it does not have a hypochlorite tank room, it is slightly smaller (3800 square feet) than the Fish Springs building.

Both buildings are constructed with CMU walls and open web steel joists under metal deck roof.  Both buildings contain 5 large pumps and 1 large storage tank.  BJG designed the pedestals for the pumps and the storage tanks.  BJG also provided the design for a structural steel catwalk in each building that is suspended from the open web steel joists.  The catwalk will be used for maintenance purposes to access mechanical louvers.

Vidler Pipes

Do you think these are large water projects?  Take a look at the tiny man next to the pipes in the photo below.  This is before the Fish Springs building was placed over the pipes.  These pipes were eventually attached to pumps that BJG designed the footings for.

Thank you for visiting.  Poke around a bit and please leave a comment.  Tell us what you think.

Delicious

Delicious defines itself as

a social bookmarking service that allows users to tag, save, manage and share web pages from a centralized source. With emphasis on the power of the community, Delicious greatly improves how people discover, remember and share on the Internet.

When an interesting link gets past around the office we make sure to put it into our delicious bookmarks, which can be found here: http://delicious.com/bjgisresponsive.    Readers can subscribe to our bookmarks, become our friend through delicious (that way we can share links directly to one another).  I am also working to get our new links posted on our blog once a month for more crossover activity.

Twitter

Twitter is a

service for friends, family, and co–workers to communicate and stay connected through the exchange of quick, frequent answers to one simple question: What are you doing?

What does that mean you ask?  I think of Twitter as a chat system/blogging platform and social networking all rolled into one.  Your entries are related to 140 characters (pretty hard sometimes).  You can “follow” people and then get their updates almost immediately.  With twitter, you can have conversations with people halfway around the globe that have common interests.

At first I didn’t know how to find good quality people to follow.  Twitter, at the time, did not have a search function.  But a website called summize.com did.  Summize, which recently was acquired by twitter, built a search function on top of twitter using twitter’s api (application programming interface, a fancy way of saying twitter opened it’s data up to summize).

Using summize, I searched for key words (revit, leed, usgbc, architecture, etc.).  Whoever said those words, I “followed”.  The true twitter-ers want a conversation, not spam pointing them to your blog.  That is the difficult part, but also the fun of twitter.

Come start a conversation with us.  http://twitter.com/bjgisresponsive

Scribd

Scribd is an interesting social network centered around the sharing of documents.  There are other ones out there (i.e. slideshare.net) but Scribd is the only one I have found that you can share the most variety of documents (word, excel, presentations, pdf, etc.).  This is also a great way to share documents on our blog.  See any one of our posts with embedded documents.

Interesting note, the document with the most views is a presentation Teresa gave on green teams to Sustainable Silicon Valley.

You can check out our documents here.

Vimeo

is a thriving community of people who love to make and share video.

This is pretty new to the BJG online strategy.  We have posted a number of screencasts from our Pleasanton open house.  I have hopes of posting fun videos from BBQs, presentations, etc.

Find us at http://vimeo.com/bjg

Feedburner

Some people use RSS (really simple syndication) to read our blog content.  It is a way to stay on top of our latest news without having to come to our site.  To use RSS, many people use netvibes, igoogle or other feed readers.

This is great.  I love for people to read our content.  The only unfortunate part is that the people who still read our content, but don’t visit the site, don’t get counted in our page views and uniques and such.

In comes feedburner.com.  When someone subscribes to our feed, it is diverted through FeedBurner so that we can track how many people have subscribed, click through, etc.  FeedBurner also has ways to monetize your feed.  Pretty neat.

Google Analytics

Oh, Google Analytics, how do I love thee?  Let me count the ways.  So much data, so many fancy graphs.  I use the free Google Analytics to track visitors to our blog.  It is really powerful, but I use it to graze over information such as unique visitors, time on site, etc.  Easy integration with wordpress through a plugin.

Digg

Digg is

a place for people to discover and share content from anywhere on the web. From the biggest online destinations to the most obscure blog, Digg surfaces the best stuff as voted on by our users. You won’t find editors at Digg — we’re here to provide a place where people can collectively determine the value of content and we’re changing the way people consume information online.

Another recent entry into the BJG aresnal of online tools.  Digg is somewhat like delicious in that you can share links, but it is much more social.  Digg goes above and beyond just a link sharing site to adding commenting abilities and perhaps most importantly voting.  Each registered user can digg (vote for) or bury (vote against) any story on the site.

Find us at http://digg.com/users/bjgisresponsive

Technorati

Technorati is a blog search engine.  It indexes the web live.  For example, the instant I post an article on our blog, Technorati automagically comes by and indexes it for us.

Find us at http://technorati.com/people/technorati/Responsive

Netvibes

Netvibes is a good tool for last.  If you go to http://www.netvibes.com/bjg you will find our netvibes universe.  It acts as not only a feed aggregator of all of our online activity (delicious, digg, vimeo, etc.) it also acts as a way to organize feeds that we think are of interest.  Right now we have a couple of tabs (architecture, bim, etc.) and on each tab we have a couple of feeds displayed.  This is similar to a blog roll, but provides you with a little more information.

Netvibes is trying to build a social network around what use to be solely a place to go for your personal start page (igoogle, pageflakes and my yahoo are others).  Users can favorite stories, interact with other people’s start pages and comment on start pages.