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Knox County School Costs Probed: Part III- Waste inherent to the traditional design-bid-build method.

by Sanford Loy

Sounds tried and true, right?

For decades procuring all public work and most private work was not debatable; the project was designed It should still work fine today one would think… but it doesn’t. There are three primary reasons why the DBB method is being ditched across the country by both private and public entities:

1. Too much hassle.

2. Too much time.

3. Too much cost.

Now, if you are a bottom line person and don’t want to read all the details here it is summed up for you in one sentence; local government is wasting your tax dollars because they don’t understand the new order of the design and construction business in the 21st century, this translates into building facilities which cost too much, provide too little, and taxes which have only one way to go and that is up. If you want to know more so you can make informed decisions on your own, here is why the above facts are true.

First, let’s review the culture of the DBB process. It is one where every “i” must be dotted and every “t” crossed before bids can be solicited. During the 60’s and 70’s general contractors had 100’s of employees, including skilled craftsmen and tradesmen and Architect’s employed engineers internally so they worked together in the same office. DBB made more sense 3 decades ago, here’s why.

Through the 80’s and 90’s both general contractors and architects had to reduce costs, reduce overhead, and reduce liability (because the legal system was looking for new and creative ways to increase their liability exposure). Architects found it more viable to hire engineers as subcontractors instead of employees. General Contractors, found it more efficient to hire subcontractors to perform work previously done with internal forces. Concrete, masonry, carpentry, case work, metal framing, drywall, and painting are just a few of the segments which shifted from being in-house functions for GC’s to areas subcontracted out.

While this created opportunities for new small businesses it led to the construction labor force being fragmented and disconnected from the control of the general contractors. This is a critical fact which changed the entire game completely. Liability and risk, as well as control of the work, shifted away from the GC and was delegated to the subcontractors. This would be all well and good… except for a few little details which were hidden in the new order of things.

Design documents began to take longer to complete because the respective designers were in different locations, thus the coordination between the architectural, structural, electrical, mechanical, and fire protection elements was less efficient. (Remember West Valley School HVAC duct/steel beam issues?) Enter the GC estimator, the drawings he was looking at were less perfect…and he was now farming out a much larger percentage of the estimating work; so 80-85% of it was being bid by subcontractors’ estimators. The subs controlled as much knowledge about the project as the Architect and GC did; so they would also have control of the cost data and error reporting. They could decide whether to share or not share the information to their advantage.

Thus the low bid subcontractors would show up on day one with a list of design, scope and/or drawing errors they had found in the bid documents. This scenario creates an adversarial relationship from day one between the Architect and the GC and the subs… and the owner often ends up in the middle refereeing the conflict with his checkbook in hand.

Obviously all this brouhaha takes more time… from design, through bidding, and building, to allow for the additional communications required by this fragmentation of contracting. Not to mention sorting through the finger pointing and price haggling of who is going to pay or not pay for each glitch discovered.

The segmenting of the risk also creates duplication of insurance and bonding; not to mention the additional documentation it requires, and more paper means more people, more attorneys, and more conflict…all equaling more hassle, more time and more cost. Everyone on your project ends up protecting their backside, not worrying about your facility.

Interestingly enough, what goes largely unnoticed is a hidden little caveat; which is potentially the largest area of additional cost created by the increased percentage of subcontracted work. The mathematical fact is that in today’s world DBB produces the lowest “combination” of sub prices submitted by one GC on a specified day… NOT the lowest potential total of ALL the sub bids available across the board.

Compare it to buying groceries. You likely buy groceries where you believe your total bill will be the lowest for the items you typically need and want. You know the green beans are cheaper at your store while the bread cheaper at another, but you shop where the total is what you believe is the lowest combination of prices. What if you could get all the low prices without having to drive all over town to get them?

The way GC’s do business in the 21st century means that 80-85% of GC bid’s come from subs; some sent to a GC via fax, 5 minutes before the bids are submitted. Some subs only give their price to one or two GC’s, some inflate or decrease their price based upon their experience with the bidding GC’s. The process becomes a big game on bid day… a game being played with the owner’s/taxpayer’s money.

People erroneously assume the DBB method provides the lowest cost because it was universally accepted in the 20th century …but times have changed, its 2010, and the way the construction world actually does business day to day requires we make the corresponding changes in the way we procure those services to maximize our tax dollars. To not do so is like ignoring the Internet…there are newer and better procedural methods available to design and build facilities, both private and public. Tune in next week to hear about those.

Next week: 21st century project delivery methods.