If you are a plant engineer, chances are that sooner or later you will become involved with a Design/Build project. You may have the task of air conditioning your computer room, recirculating your facility's cooling water, or removing fumes from a production process. These projects may be too rushed for the full cycle of design and bidding procedures, or too critical to place in the hands of "low bid" contractors, or to separate engineering from construction responsibility. In these cases you may want to call in a contractor to do the work as well as to designate the details of the project you have in mind. This is called "engineered work," or "Design/Build" work. It is attractive work for a contractor because:
Surprisingly, the latter point is not a disadvantage for you, the customer. Although there is the possibility that a contractor may be tempted to cheapen a job by furnishing inferior equipment, there is also the strong chance that he knows which equipment is most readily available, is most reliable, and does the job best. The contractor, after all, stands to lose if equipment or systems do not function properly. He gets the callbacks and runs the risk of not getting his final payment or, more important, your repeat business.
Assuming you conclude that Design/Build may be the appropriate choice, how do you go about selecting a contractor for your particular project? Your company may have a list of qualified sources who are selected to present proposals to your firm. Check with people in your company who may have used these contractors. It is worth discussing their experiences at length since memories can be vague, especially bad memories. If you do not have a list of qualified contractors, speak with your counterparts in other companies.
How many prospective contractors should you interview? My suggestion is two to three. Call each one in separately. Group meetings discourage active participation. When you speak to your candidates, look out for anyone who appears to be unresponsive. At your meeting you should be able to discern whether a contractor is an unlikely candidate to get your job done properly. By his comments, he will usually let you know. Rely on your intuition and do the contractor and yourself a favor, don't even give him a chance.
What if you really want to use a specific contractor? After all, a particular contractor may have a level of expertise in your project area or a familiarity with your plant that you consider a benefit toward the success of your project. He may be a known quantity, with a good staff!
How can you utilize him in an ethical manner that will still assure you that his prices won't be unreasonable?
There are several ways of achieving this objective. Many contractors are willing to perform projects on a guaranteed maximum basis, an open book basis, or a shared savings basis. Your contractor should be able to explain each of these methods to you in detail.
If markups and labor rates are negotiated in advance, a contractor who is interested in long term relationships will forego higher margins if he knows he is going to get your follow-on business.
Let's discuss what you should tell your contractor.
You and your selected contractor should generate a performance specification. It should include the following items:
A detailed set of design parameters is required. What are the design conditions? What are the outside and inside temperatures, hours of operation, etc.? What agencies or association standards should prevail? Your contractor should help you with this.
With regard to equipment desired, if you have a preference, specify the brand names you would like to see used in the project. If you are not sure about the equipment you desire, ask that the manufacturer's specifications be included with the contractor's proposal.
One of the most common problems in this part of the specification is that someone really gets too conservative in specifying performance criteria. The cost and energy implications of overspecification can be startling. A Class 100 clean room can cost seven times as much as a Class 10,000 clean room. A temperature specification of ± 1 F may require a computerized control system instead of conventional electric system.
If a tight specification is required, use it. If not, the requirements should be loosened up for big dollar savings.
The remaining items should be covered: 1) terms of payment, 2) guarantee.
Make your selection of the successful candidate based on price and your sense of who will do the job best. (You are being paid to exercise this kind of judgment.)
When there is a wide spread in pricing, interpretation is not that simple. In Design/Build projects, it may mean that the higher bidder is going to furnish you with a high quality solution to your problem. His proposal should indicate to you whether or not this is the case. It is extremely important, in Design/Build contracting, that the proposals be evaluated critically and that the final award not be based solely on a price decision. Your judgment is important.
Once you have made a final award, your project will require careful monitoring. As a project administrator, one of the things you should be looking for is whether the job is being staffed and paced adequately. If a contractor is treating a job as a fill-in project because he is shorthanded or operating with too much backlog or too little capital, your job will suffer. If there are quality defects that you notice, they say a lot about the entire job since there are many aspects of a project that are not visible. With regard to staffing and manning, there are times that a contractor does delay either the startup of certain phases of the project so that all of his resources can be mobilized at a time most convenient to him. If you see slippage in your timetable, it is time to complain, and the best way to complain is in writing. Faxes make the biggest impact.
Other potential problem areas lie in your approval of other equipment because it is supposedly more available. After the project is complete, short-term decisions can be forgotten, and all that will remain is a system that is not function properly. And remember, unless your contractor is diligent about the final details of the startup, calibration, balancing, and owner instruction (including owner's manuals), your project will never be really finished. The job must be completed in a definable manner.
Until now, we have discussed what you should do to protect yourself and your project. Let's discuss what the contractor should be entitled to from you. If you call in a contractor on a Design/Build job, he is entitled to confidentiality. Reproducing his proposal, even with the price removed for the purpose of comparison shopping, is neither fair nor confidential. It isn't even smart because there are some contractors who would be perfectly happy to copy that proposal, guess at a price, and submit it as theirs. The problem is they might not have any idea how to work out the details of the design if they are awarded the job. If a competitor wants to submit a lower bid, let him assume the responsibility of developing his own design concept. The contractor's expertise is his property, which he shares with you in confidence. It's good business to respect that confidence.
A responsive proposal will cost a contractor anywhere from several hundred to several thousand dollars in effort.
A responsible contractor is willing to take his chances with this kind of expenditure if he has a reasonable chance of being awarded the job. If there is a chance that the project will not proceed or if you are looking for a budget on a project, in fairness to the contractor, he should be informed. He will treat a budget proposal as a budget proposal. You will get the information you require and proposal preparation will cost the contractor a good deal less.
The contractor is entitled to know after all proposals are in whether or not he was successful. A decision within a month is proper. Beyond that time, price increases as well as changes in contractor backlog begin to affect profitability of any given project. Whenever possible, once prices are in, make a decision rapidly. Keep everyone's enthusiasm up.
In Design/Build work, it is unusual for a contractor to request extra funds unless you have initiated a change in scope. Implicit in a Design/Build project is the fact that the contractor will be furnishing everything necessary to make a project function. His proposal should provide for contingencies. It is unreasonable for a contractor to come back and ask for extra funds because he has neglected to include a necessary item in the design. On the other hand, there are times when a request for a change order may be justified. A clear change in scope or an acceleration in the schedule may be justification for a legitimate price change, otherwise, no extras!
Design/Build contracting continues to assume a greater role in today's high tech, high speed environment. Successful Design/Build projects never occur accidentally. They require thorough planning on the part of the client as well as the contractor. Only through this joint and sincere effort can a successful outcome be assured. Jim Trombly Plumbing & heating can handle all these details for you! Give us a call at 668-5468.