Flavin

As the regional operations head for a major financial group, Carolyn Smith had just been given the assignment to consolidate four separate local offices into one facility. While pleased to have been given this responsibility, Carolyn sat at her desk with her head in her hands as she recalled all of the problems with the last such assignment. Then, as now, her employer wanted a low-cost building with good curb appeal, capable of higher than typical occupancy, with plenty of parking.

On the previous occasion, in another part of the country, the effort had begun well. The local broker had worked diligently to identify several locations and her company’s real estate committee had approved her site recommendation. Negotiations with the developer had proceeded smoothly and an agreement was reached. The developer introduced her to an architect with experience in similar projects and Carolyn executed a separate design agreement with her. The architect was pleasant and knowledgeable and appeared to listen to Carolyn’s requests.

The initial design phase went smoothly, but the completion of the drawings needed for construction took twice as long as anticipated. Whenever Carolyn called for a progress report, the response was always, “We are nearly done and should have the drawings to you shortly.”

Once the drawings were completed, the developer identified three contractors who all subsequently submitted bids. The lowest bid exceeded the preliminary budget by 20%. On the recommendation of both the developer and the architect, Carolyn selected the lowest bidder, who immediately began “value engineering” to reduce the cost down to the budget level. The contractor’s initial savings recommendations were violently opposed by the architect as too damaging to the design and the developer simply shrugged his shoulders. The contractor and the architect finally reached a compromise that left the project still over budget, and now behind schedule.

Several times during the ensuing construction, the contractor raised design issues that were directly the result of the cost saving effort. When Carolyn sought a solution, the architect pointed at the developer who pointed at the contractor who pointed at the architect. The job was eventually completed, but well past the target date and close to 20% over budget. Carolyn felt she had failed her company but had learned much in the process.

As Carolyn commenced her new assignment, her first stop was a trusted broker in the new locale. After she described her first experience, he suggested she consider a “design-build” approach this time around. Such an approach would have several important benefits. First, one point of contact for the entire process would mean no finger-pointing. Design-build also would provide a coordinated design, development and construction response to her criteria. The budget would be based on real-time cost information to minimize or eliminate “value engineering.” Finally, the schedule would be determined at the beginning of the project by all participants, who would commit jointly to a delivery date.

Carolyn liked what she heard but had some concerns. She asked the broker how she would know that the design-builder wouldn’t charge the company too much. The broker made clear that a reputable design-builder will not only discuss fees with her up front, but also provide comparable market quotes. In reputable design-build practices, at least three bids would be obtained from all subcontractors and shared with the project owner. Design builders should proceed on an open-book basis so that the owner and its financial team can track every dollar.

Carolyn knew her company would worry that a big design-build group would just pull some old design off the shelf and jam her requirements into it. The broker responded that a design-build group, like a professional in any other business, knows that it is only as good as its last job. As a result, the design will match or exceed the best of market.

Finally, Carolyn wondered, if design-build is such a good approach, why doesn’t everyone do it? The broker explained that many groups have tried and are currently trying to meld disparate architecture, development and construction groups into a “design-build” team, but the culture is wrong. Such groups are used to dealing with the others in “win/lose” relationships and have a difficult, if not impossible time attempting to achieve “win/win” in a team situation. Successful design-builders have emphasized teamwork among the disciplines for decades.

Based on this exchange, Carolyn picked a design-build group. Their integrated approach meant that the project delivered on time and on budget, with minimal squabbling among the partners. It was a bonus that the occupants of the new building love its appearance and efficiency.

A new office or industrial facility, whether owned or leased, represents a major commitment for any company and a major risk for the decision maker. A seasoned “design-build” firm can reduce that risk and minimize the headaches along the route.

The views expressed here are those of the author and not of Real Estate Media or its publications.

John Flavin is a vice president of the Florida Region for Opus South Corp. in Tampa. He can be reached at john.flavin@opussouth.com.