Building Green

Although many have written about the major ways in which our lives are expected to change as a result of the green revolution, few have focused on the ways in which it will alter the business fabric of the real estate industry, including--on the most basic level--how business is conducted between owners/developers and contractors. Traditionally the project delivery model takes two forms:

Design-bid-build: In this common type of delivery system a general contractor bids competitively on a project according to construction documents prepared by an architect. The lump sum bid includes many bids from subcontractors, with the general contractor's fee being built into the total. The general contractor is the constructor: he holds the contracts and is responsible for the schedule, the budget and the timely completion of the job.

Construction manager as owner's representative: In this model, the construction manager performs the tasks related to the coordination and technical administration of the project when the owner is not comfortable managing the general contractor. This delivery system adds another layer of expense--the owner/developer must pay both the construction manager and the general contractor.

There is yet another model, however, known as open book general contracting or construction manager as constructor. I believe the green revolution will result in the increasing popularity of this hybrid delivery system, in which the construction manager is hired prior to the completion of the design phase to act as project coordinator and general contractor. The construction manager accepts bids from subcontractors, with all information and proposals being shared with all parties on an open-book basis.

This type of delivery system possesses the advantages of the design-bid-build system in that the CMC holds the contracts, thus sparing the owner/developer the administrative burden of dealing with multiple contracts with each of the trades, which might mean as many as 10 or 15 contracts. But in this system, the owner/developer is also privy to the contents of the bids, and is spared the added expense of hiring both a construction manager and a general contractor.

Although the CMC configuration is not common, it offers a number of advantages in terms of green contracting, as well as in terms of cost savings, which is all the more important in the current economic downturn.

Under the CMC type of delivery system, the accounting is completely open: the owner/developer knows exactly how much is being spent. By contrast, under the other systems the owner/developer is presented with a total cost, but is unaware of the cost of each element. Any savings that is realized--for instance, if the flooring material ends up costing costs less than originally anticipated--goes into the pocket of the general contractor rather than that of the owner/developer.

The CMC system also eliminates multiple mark-ups. Subcontractors typically mark up costs by 5 to 10 percent in the bids they submit to general contractors. Many subcontractors in turn subcontract to other tradesmen--the HVAC subcontractor, for instance, may subcontract the ductwork or the electrician may subcontract the fire alarm system. These bids are also marked up, thus resulting in multiple mark-ups. Under the CMC system, however, the owner/developer pays the actual costs.

The greatest advantage of the CMC delivery system, however, may be that it allows the construction manager to work with the owner/developer and the design team from the earliest stages of a project. The construction manager can help analyze the project from the standpoint of "contructability," define the scope of work to meet the owner's needs and budget constraints--for instance, by encouraging the architects to use more cost-effective design elements--and help establish realistic schedules.

Thus a project gets off on the right foot from the very beginning in terms of being under budget and on time. For example, one important way the early presence of the construction manager allows the owner/developer to save is on labor costs. The construction manager might point out, for instance, that a poured concrete foundation, which requires ironworkers, masons, carpenter and laborers, could be replaced by a concrete block foundation, which requires only masons and laborers.

The CMC delivery system also promotes harmony on the job. Unlike the other types of delivery systems, in which relationships among the various parties--construction manager and general contractor, for instance--are often adversarial, the CMC delivery system encourages cooperation because all parties are more likely to have the best interests of the project at heart, rather than that of their own pocketbooks.

Although it works well for most types of projects, the CMC type of delivery system works particularly well in the case of green building, where the early involvement of a construction manager familiar with green building techniques--preferably one recognized by the US Green Building Council as an accredited professional--can help a project gain valuable "points" toward various levels of USGBC LEED rankings.

By contrast, under the other systems, in which the general contractor isn't brought aboard until the design is complete, it may be too late to make changes that would help make the project more green.

Tekton Development is using the CMC delivery system in the conversion of the historic Richardson Building in downtown Newark into Richardson Building Lofts, a chic loft apartment building. Because Tekton has been involved from the very beginning, it has been able to advise the developer, Newwork Real Estate, on strategies that will eventually allow the project to gain additional points toward the LEED "silver" certification it is seeking.

Another advantage of early involvement is that the construction manager is able to participate in the design charrettes--or collaborative meetings with stakeholders, such as neighborhood residents and public officials--that are encouraged in the green building process. The USGBC promotes the participation of as many members of the team as possible in these charrettes, but under the other delivery systems the general contractor usually isn't on board early enough.

Although the CMC delivery system has many advantages, it requires a greater commitment of time and energy from the owner/developer. The owner/developer isn't just handed the keys at the conclusion of a project as in the design-bid-build delivery system, rather is involved in every step of the construction process. But in the current economy, the prospect of saving 10% to 15% for the same outcome is bound to make such a commitment more attractive.

And for the owner/developer who is interested in going green because of a personal commitment to the green movement, the potential for savings on energy costs or the competitive edge offered by a green project, the use of the CMC delivery stem ensures a greener project and outcome.

Brendan Murray is president of New Brunswick-based Tekton Development Corp. The views expressed in this article are the authors' own.