Buying Construction

A manufacturer of metal structures is selling buildings on our local radio stations, promising them for $50 a square foot. One can only imagine what the fine print or, for that matter, the building, includes. This may be the right choice for some, but how you buy a building – or hire a contractor – can and should match your organizations’ priorities.

The American Institute of Architects and The Associated General Contractors of America outline the primary options in a Primer on Project Delivery published in 2004:

  • The Design-Bid-Build method, sometimes thought of as “traditional” method, engages the three primary participants – Owner, Architect, and Contractor – through separate  and sequential contracts. Architect (and engineers) working for the Owner, prescriptive contract documents, upon which contractors base competitive, lump sum bids. The lowest (or in some cases “best value”) bid wins the bidder a contract for construction with the Owner.
  • In the Design-Build approach, a consolidated entity (the “Design-Builder”) provides both design and construction services to the owner. The design-build effort can be led by either the Architect or Contractor.
  • Construction Management at Risk [which include most “negotiated ” or “partnered ” projects] recognizes that contractors act as both builders and contract managers. The Contractor (who is the “CM@R”) is engaged early in the design period. Architect and Contractor have separate contracts with the Owner, and as the Architect develops the design, the Contractor weights in on cost, constructability, and cost issues. Near the end of the design period, the Contractor “guarantees” a maximum price for the project.

Comparison Shopping

The Design-Bid-Build method offers the greatest control over the final product, but with greater risk to cost and schedule. We like this one least. It’s a political process, designed to signal fairness – not to get the best price. (Hence its heavy use by governments.) The bid process incentivizes participants to interpret ambiguity in their favor and look for increases later. Gray turns to green. In so doing, it tends to create an adversarial environment. It also operates on a kind of cynicism, suggesting that the only effective reason for fairness is self-interest. The best contractors don’t like or need this kind of work and, if they have a choice, will avoid it.

Deciding to use a design-build contractor, of which the metal building peddlar first mentioned is the worst kind, communicates that cost is the pre-eminent issue. For some of us this may be the case, and it’s a good choice as long as we recognize that in doing so a great deal of control over the final product is surrendered. The designer now works for the builder, not for you. For the contractor, time spent with the Owner is a cost to be minimized. To the extent that the design-build contractor offers control of the product to the owner, much of the cost advantage dissipates.

In our experience, hiring a construction manager at risk offers a good balance of control for design and budget. The selection process usually involves looking at qualifications and interviews, but can result in a good match of values and personalities. Concerns about cost are answered by transparency and, if necessary, bidding at the subcontractor level. Since the Contractor is on the same “side ” of the table as the Owner, it’s in everyone’s interest to share the numbers ahead of time. Beware the builder who, under this scenario, fails to show how the cost is calculated.

We’ve used all three, and some others besides. If the right players are involved, the structure of the relationship doesn’t matter much. Nor does it matter much if the wrong players are on the team. You can’t make a “bad” Contractor (or Architect) “good” by choosing the right contract. But how you buy your buildings can – and should – communicate your church’s priorities.