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Construction Delivery

Competitive bidding may rule the construction scene, but that doesn't make it the best choice for all campus projects. Here's how your peers are breaking out of the box.
University Business, Jul 2007

LET'S BE PERFECTLY clear: No one is kicking the traditional design-bid-build model to the curb. It remains the most widely accepted model for getting campus construction projects done, because its linear process is easy to manage and it sets the stage for the lowest, responsible price. After all, the system offers college and university officials more than one set of checks and balances and controls, and it works in real time for truly market-driven invoices.

But sometimes it pays to get the cart before the horse. For instance, campus architects and pencil pushers aren't hesitant to explore alternative delivery methods when opening a dormitory faster means an income stream sooner, or when the facility design becomes complicated and the available in-house staff amounts to just a handful of already overworked architects.

According to Richard Belle, vice president of public affairs for the Design-Build Institute of America (DBIA), as much as 40 percent of all U.S. nonresidential construction currently uses the design-build alternative delivery method. That's quite an impressive percentage compared to the single digits this method scored in the 1980s. Insiders at Wight Construction in Darien, Ill., predict that by 2015, more than 50 percent of all commercial work-which includes institutions of higher education- will be delivered using this option.

On the other hand, 2015 may be a generous estimate for public institutions, which remain rather limited in their construction choices, admits Christopher Haupt, a senior vice president at the Pittsburgh architectural and engineering firm L. Robert Kimble and Associates. Today he sees far more delivery method activity in private IHEs compared to state-funded ones, but he adds that signs of an ice melt are beginning to appear.

Take his home state of Pennsylvania, for example. Typically, the Department of General Services manages the entire process for major campus construction projects within the Keystone State, mandating that general construction, mechanical, plumbing, and electric bid packages toe the traditional line. But recently, the state began elegating some of the projects directly to its state universities, offering them a little more flexibility in who they choose to use.

Yet college administrators flirting with the crop of newer delivery methods need to adopt a different mindset if they expect to reap results, Haupt says. No matter which route they choose, he believes the biggest mistake is not understanding their role in communicating details of the project. "We see a lot of administrators who don't understand that, by contract, they should communicate through their architect to the contractors. They walk the site and give directions for the contractors to follow, and a lot of problems result," Haupt says. Such blunders put colleges and universities legally at risk, as courts have ruled that orders from a perceived owner are binding. So with that caveat, sit down with your institution's design professionals and work out a risk analysis on the following alternative methods for your next project.

How it works: The institution gives one contractor a performance specification, and then that contractor must undertake the project from design to construction according to those parameters. (Think of the ancient master-builder arrangement that resulted in the Parthenon in Greece.) A representative from the IHE talks directly to the designated spokesperson for that design builder.

Advantages: Experts say the main reason colleges and universities like the designbuild model is that it minimizes cost risks by guaranteeing a maximum price. It is an ideal arrangement when schedules are compressed, says David Miller, director of the St. Louis-based Trivers Associates architectural and planning firm, which has done work for Oberlin College (Ohio) and Southeast Missouri State University. Miller tells clients to assume this option can slice off 30 percent of the time a traditional competitive bid process would require, since the method means overlapping the design and construction steps.

DBIA leaders are quick to point out that this route also improves risk management because it clearly defines cost, schedule, and quality. In other words, kiss change orders due to errors and omissions goodbye.

Disadvantages: Erasing the situation that pits architects and builders looking over each others' shoulders also can endanger quality, Miller warns. And that guaranteed price can tempt design-build contractors to inflate a few numbers here and there to protect their wallets against unforeseen forces, Haupt adds.

To keep from being taken to the cleaners, negotiate for an open-book process, meaning the institution has the right to review all the raw numbers during construction. "You need to know exactly what you are paying for," Miller says. "Just realize this does take a bit of expertise on the part of the owner, so you have to have staff on board to handle the audits."

Finally, representing the project owner, an administrator must hand the contractor a set of minimum standards. Beyond those standards, the rest of the decisions are pretty much out of your hands. If you aren't precise up front, you can accidentally sacrifice control within days.

When the state of Indiana passed a law in the fall of 2005 allowing its public IHEs to opt for design-build delivery, Bob Meadows seized the opportunity immediately. By early 2006, Meadows, the systems vice president and university architect at Indiana University, was exploring this avenue to build a new 79,500-square-foot service center on campus.

His reasons were the obvious ones: He wanted to speed up the timetable and get the biggest bang for his buck. "The only thing that was a bit difficult was that we were the first ones as far as we knew in this state to do this. We had to research other places to get the wording on the contracts and stuff like that, so it took a little longer," Meadows says.

Now that his team and other IU staff occupy the service building and he has a classroom/office building under construction with the design-build process, that hurdle is behind him. He says the university has also smoothed out the rough edges on this new mindset. For instance, a few of the architectural engineering services they took for granted in the past-such as being able to insist on certain design details after the initial specs are given-suddenly weren't part of the design-build contractor's scope.

"The first round was hard, and we didn't give [the design-build firm] a lot of direction. The second one we did better, and I think the third will be better still," Meadows says.

And there will certainly be a third project, as Indiana University was able to build the service building for just $84 per square foot-a significant savings-using this method.

Harrisburg University of Science and Technology is currently constructing a new academic center featuring seven floors of academic space, laboratories, and offices with nine stories of parking facilities. The two-year-old university, already pressed for space, needed a completion date officials could count on, as well as a guaranteed maximum price (thanks to tax-exempt bond financing).

"In other businesses you can miss something by a month and you simply move in later. In an academic setting, a month could mean you've delayed at least a semester if not an entire academic year," points out Eric Darr, HU's provost and executive vice president. To cap off the situation, HU's planning department office has a head count of just three. That spelled the construction manager-at-risk method (see below) for Darr, especially since he was pleased with the job Reynolds Construction had done as the general manager on the university's initial facilities. "Had we not had that comfort, it may have been a more difficult decision to make," he says.

Darr did have to hammer out a few contract twists. First, he stipulated that the architect on the project review single-pay applications from his CM-at-risk as a check and balance. He also put in the CM's contract that the firm must make efforts to hire women and minority subcontractors for the academic center. The firm, Darr reports, was very accommodating in including those commitment sheets into its own contracts for the subcontractors to sign. "It's up to the institution to make sure that happens," he insists.

HU couldn't welch on its responsibility to oversee the commissioning, testing, or certification contracts either, as these requirements call for independent third parties. "So while CM-at-risk does greatly reduce the workload in terms of construction contracts and requests for proposals, it doesn't completely eliminate them," Darr explains. "You're still in the contracting business."

On the other hand, this alternative arrangement convinced the construction manager to invest in a relatively new insurance product that negates the need for subcontractors to provide performance bonds. Since the academic center is a $73 million project, that requirement alone would have been a sticking point for those smaller minority businesses Darr wanted on board. "It absolutely headed off trouble we would have run into had we taken a traditional delivery model," he says.

How it works: The institution selects a construction manager based on qualification rather than lowest bid. The CM in turn consults with the designated architect to develop a design. It's up to the CM to produce a guaranteed maximum price, then coordinate bids and hold all contracts for the subcontract work as well. Like the name implies, it's the CM sticking his neck out. In this scenario, university representatives communicate with both the architect and construction manager.

Advantages: For starters, the CM-at-risk model addresses the checks and balances void between design and construction that design-build can't fill. Additionally, the construction manager, who gets his paycheck directly from the university, usually develops a strong allegiance to the administration's needs. And, as with the design-build method, the construction manager is at the table early to help ensure the blueprints are practical and affordable.

That's why Miller gives this method a thumbs-up for facilities on a tight timetable and for complicated projects likely to change in midstream.

Disadvantages: The construction manager's fee isn't competitively bid, which makes it more difficult for the university to determine if the work and price align. Also, rather than serving up the design plans to the university for approval, the architect often checks in with the construction manager first. The institution's interests in terms of design quality can be shunted down the list.

And according to the American Institute of Architects, state laws vary wildly on this delivery method, from who can be a CM and when, to whether it's allowed at all. (Check out for state law details.)

How it works: The contractor prices the job by turning to an order book and multiplying the set fees for materials and labor by an agreed on number. In exchange, the institution guarantees a minimum of work over a set period of time. JOC differs from the traditional bid model by combining all the elements of multiple jobs into one single contract at fixed unit prices, then laying that deal at the university's doorstep before the institution tips its hand as to where and when the work will be done. The firm earns future contracts by serving up quality. JOC is also known as indefinite delivery.

Advantages: Because the construction company is combining similar projects to determine its prices, the university enjoys megabulk pricing breaks. An IHE can kill two birds with one stone from an overseer's perspective by bundling the projects, too, and eliminating the need to write separate contracts for every task. It has a 20-plusyear track record with the Department of Defense, with professionals estimating the overall savings at 12 to 16 percent over the usual bid process.

Gary Aller, director of the Alliance for Construction Excellence at Arizona State University, rates JOC as excellent for repetitive jobs and projects where little tasks are sure to crop up along the way.

Disadvantages: As much as officials would love to apply this cost savings model to everything, it's not designed to handle large, complex new construction. Some states even cap JOC contracts to less than $750,000.

No matter what alternative delivery method is chosen, selling the idea of taking the road less traveled shouldn't be a stumbling block, says Haupt of L. Robert Kimble and Associates. He has found that as long as the facilities department does its risk analysis and can present sound strategic arguments, most boards will go with the recommendations.

"Bottom line, in a college setting, quality is important," Miller of Trivors Associates agrees. "No matter which delivery method you use, the quality of your architect and your builder, their reputation and past work, is paramount." Everything else is just details.

It came down to envy for officials at Washington State University. After watching the state government and rival state universities adopt job order contracting, Kate Kamerrer, director of accounting and contract administration in Facilities Operations, was ready to take the plunge too. If she could save time on fully scoping a project with specifications and drawings, preparing for the bid, and advertising it, it was worth a shot.

Limited by state contract to two work orders in a calendar year of $150,000 or more, Kamerrer relies on the JOC route for those lower priced projects, such as duct cleaning and room remodeling. WSU has used this contract for plumbing and piping work, to replace sprinkler heads in several buildings, and even to demolish a house on campus.

The transition, of course, has stemmed from architects and designers scaling down to a smaller spec book and trusting in the JOC contractor to partner and work through issues as they come along. "But in terms of pure contract administrating, we've saved considerable time," Kamerrer reports. "In some cases it took a month off our process time." On the other hand, the JOC contractor has bid on three of WSU's public works jobs and has yet to post the best prices.

"That kind of makes us take a step back," she says. From the beginning, her team understood that some line items in the book used by WSU and its JOC to determine the cost of each job would be higher than the university could get them for on its own. "But there are others our contractor is taking a bath on," she adds. "So in the end, I don't think it's more expensive necessarily, but I don't think it's any significant savings, either."

Kamerrer's advice: Partner with companies that already have JOC experience. "This was a brand new process for us," she points out. "We had no idea how to deal with job order contracting, so it would have been more of a struggle without that help," she says. Today the university is completing its second year of the contract and definitely plans to take the third-year option.

Uncertain of the current crop of alternative delivery methods? Be patient a little longer as two additional systems begin to work their way to the higher ed setting:

This arrangement works like the construction manager-at-risk model, except the CMA isn't sticking its neck out.

In this case, the agency is merely the college or university's representative; that firm does not actually hold the subcontractors' contracts. The agency model allows an institution to fast track but still maintain control, says Miller of Trivers Associates. On the other hand, a higher ed institution needs its staff to make daily decisions at the construction site.

Known as a hybrid design-build method, officials select an architect who develops the design of the new facility (think concept and schematic design) but doesn't produce all of the construction documents.

The chosen design-build firm takes over at that point to see the project through to completion. Owners certainly gain a better understanding of the project before they award a design-build contract with this method.

The compromise also avoids what architect Haupt of L. Robert Kimball and Associates calls "architectural creep"-that budget- busting habit some professionals have of adding more scope or detail while producing construction documents that weren't in the previous cost estimate. Theoretically, bridging means that once the architect hands over the drawings to the client, that's it.

On the other hand, there's also room for conflict between the initial architect and the builder. If changes are necessary to get the project in line with the budget, the design- build team is only under obligation to meet minimum criteria standards for quality, experts say.

To the best of Haupt's knowledge, only the military has used the bridging method extensively. He recently worked on a sports arena via bridging, and it was the first in its industry. So far, no colleges or universities have taken the plunge. "Unless it's a big, risky project, I'm not sure they would choose bridging," he explains.

But ultimately, of course, the decision is yours.

Julie Sturgeon, a freelance writer based in Greenwood, Ind., frequently covers construction and facilities issues.

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