Trends in Construction Project Delivery
Morphing methods, changing times
Workers perform contruction on the Kodiak Public Library, a design|assist collaborative project with Cornerstone General Contractors and MRV Architects.
© Hook LLC, courtesy of Cornerstone General Contractors
In economically challenging times, companies often need to modify the way they do business in order to stay in business—that is, they need to provide the services that the client wants, even if it’s not the way it’s always been done. In the commercial construction business, the go-to project delivery method has traditionally been design|bid|build.
Mike Prozeralik, principal architect and president of kpb architects says, “For the longest time the industry was: You meet with an architect, they design the building, as the client you go out into the competitive world and you bid it, and the owner may elect to select the lowest bid, or another bid that he thinks is more qualified.” However, Prozeralik adds, when using the design|bid|build project delivery method, there’s always the potential for changes due to change order and scope creep, which is where unknown factors and challenges in a project are discovered after the project has commenced.
Those changes, according to Jeff Koonce of kpb architects, can add up—and in today’s economy, many clients feel that it is better to know for certain what something is going to cost rather than erroneously anticipating—and hoping—that the project will stay within budget.
Additionally, as time is money, finding and following the currently available opportunities can often equate to proving a track record of good stewardship of someone else’s money—and time—in order to get their business.
According to Joe Jolley, a partner at Cornerstone General Contractors, “Commercial construction has always been expensive, but in today’s economy controlling cost and the schedule is more important than ever.”
When the difference between the estimated cost and the actual cost of a project can mean millions of dollars, companies are hoping for extra assurance that they won’t be left high and dry or—at the very worst—left with a project that cannot be finished.
Alaska Court System – Boney Courthouse Phase 2 Renovation is a current design|assist collaboration between Cornerstone General Contractors and Kumin Associates Inc.
© Hook LLC, courtesy of Cornerstone General Contractors
Cornerstone General Contractors
According to Jolley, the trend in project delivery methods in Alaska in recent years has leaned toward design assist or the construction manager|general contractor (CM|GC) method, also known as the construction manager at risk (CM@Risk) method.
“This approach is different from the outset because the relationship between the owner, design team, and general contractor are unique,” Jolley says. “In CM|GC, both the lead designer (typically the architect) and the general contractor establish individual contracts with the owner. Structurally, this gives the owner greater control over the project by reducing the stereotypical ‘oppositional’ structure of a traditional method. In this way, both the design team and the builder are serving the owner individually, yet expected and incentivized to cooperate to find creative solutions and innovations to reduce costs and the construction schedule.”
Jolley describes how the CM|GC method brings the design team and general contractor together as team members in a cooperative two-step process: The first step is called pre-construction, and during this stage the general contractor typically joins the design team when it is 35 percent complete, and then offers its expertise with how buildings go together and which materials, methods and phasing techniques can improve a project’s overall cost and schedule.
“At the conclusion of pre-construction, the building design has been completed with all parties—including the builder—on the same page, “ Jolley says. “The goal is to identify as many project considerations as possible prior to this point, so that once the second step or ‘construction’ begins, most potential challenges have been brought to light, addressed and planned for.
“Ultimately, this collaborative process reduces risks for the owner, design team, and the general contractor. On ‘paper’ all parties know what needs to be done, where the challenges will be, and what the cost and the schedule will be—all before actually beginning the work.”
In 2007, Cornerstone made the strategic decision to focus on design assist or CM|GC project delivery, and their current workload is made up entirely of this project delivery method. Completed projects include AVTEC Culinary Arts Building (2006) with NVision Architects, UAA ConocoPhillips Integrated Science Building (2009) with ECI Hyer Inc. Architects, and UAA Health Sciences Building (2011) with Livingston Slone Architects.
The team at kpb architects has a slightly different experience.
“Where everybody’s going is the design|assist or design|build—those are really favorable delivery methods right now not only with the state but with private industry,” says Jeff Koonce, founder and principal at kpb architects. “The one that we’re working on a couple of projects right now is called a GC|CM, general contractor construction management.”
According to Koonce, a good portion of kpb’s work is design|build—but unlike many other firms, kpb prefers to work collaboratively and has done so for more than 30 years.
Jolley from Cornerstone provides a clear understanding of the difference between the two methods: “With design|build, the general contractor is typically the contract holder serving the owner, and they retain the architect or design team. It structures the project team in a way that puts the design team in service of the builder and can reduce the amount of control the owner has on the design.”
Based on the sentiments of Koonce and Prozeralik, it seems that one of the core benefits of design|build sits squarely in the realm of recognizing time as money, and the value of knowing how much something is going to cost rather than the owner hoping for the lowest price and crossing their fingers that everything will turn out as planned.
“It doesn’t necessarily make the budget lower,” Koonce says, “but it does help to compress time and reduce risk. And those are key factors that are very attractive to the market.”
As for other benefits, Koonce says that using the design|build project delivery method “also helps the general contractor and the owner get their heads around the project earlier on and it also helps the architecture and engineering team focus more on a real solution—or understand alternate solutions—earlier on with real-time feedback, so there’s opportunities to use that to our advantage for design opportunities, material selections and better solutions.” This, according to Koonce, prevents the owner from “going in a direction without true feedback from what’s the availability of materials in the industry and relative and comparative costs.”
Prozeralik touts the benefits of the fiscal certainty. “We work things out so the cost is the cost,” he says.
According to Prozeralik, when utilizing the design|build project delivery method, “In many cases, during the course of the design, since the contractor is sitting with us—along with the client—we’re working through the design issues. As far as the scope goes, they’re confirming the costs as you go. So when different things come up, they help with their construction costs input, on the means and methods, how to put something together, how you make cost savings to pay for other things and they come up with a guaranteed maximum price. So that the owner knows, ‘Okay, I’ve got the design, I’m not going out to the competitive bid world, where it’s not bottom line and the lowest bid.’ He controls the change orders.”
“We work through the construction, and then when things come up, we work jointly together and there’s no change orders or other big issues—we work those things out so that the cost is the cost.”
Koonce, however, is quick to add that there’s no right or wrong method for delivering a project—it is simply a matter of what the owner feels most comfortable with.
“I think the way we deliver projects are very beneficial to the client and the team as a whole,” he says. “the good thing about this process we control costs and turn out some very nice work.”
Recent kpb architects design|build projects include the Navy Seals training complex building in Kodiak, Goose Creek Correctional Center near Point Mackenzie, and the affectionately dubbed “909,” the new NANA Regional Corp. headquarters at 909 West Ninth Avenue in Anchorage.
The Nikiski Fire Station No. 2 is a recent project by K+A Design Studio.
Photo by Chris Parker, courtesy of K + A Design Studio
K + A Design Studio
Although Bill Kluge, principal architect at K + A Design Studios in Kenai says that while he agrees that there is a growing trend towards design| build in the last few years, the majority of his work still utilizes the design| bid| build approach.
“Owners tend to believe that they are getting more building for their dollar utilizing design build approach,” Kluge says. “One must be careful though that the savings aren’t realized due to contractor shopping prices resulting in inferior materials used throughout the project.
“The most successful projects we have done recently are from completive bid approach,” Kluge adds. “The design is fully realized with products the owner has helped select and projects have been on or under budget.”
He also indicates that costs can be mitigated by minding the season. “It would be good to encourage all owners to finalize design early in the year so the projects can bid in March rather than in the middle of construction season. It is very important to optimize a construction project around our relatively short warm seasons. This results in more competitive bids and a better value for owners.”
Recent K + A projects include Nikiski Fire Station No. 2 and the Davis Block and Concrete Showroom.
Cornerstone General Contractors pour concrete at the Boney Courthouse Phase 2 Renovation, which includes substantial work to several floors of the facility.
© Hook LLC, courtesy of Cornerstone General Contractors
Around the Next Corner
There is another project delivery method that is gaining popularity around the country, but has yet to make its mark on Alaska: Integrated Project Delivery, or IPD.
“Integrated Project Delivery takes collaboration to the next level by employing a tri-party agreement (contract) between the owner, designer, and contractor,” Jolley says. “In contrast to design|assist, IPD contractually binds all three parties in a way that ties each of their individual successes to the success of the project—all before design has even started. Agreements vary, but they can include clauses regarding limits of liability, cost transparency, shared risks rewards as well jointly developed project objectives.”
“At the American Institute of Architects national convention, I went to a seminar on IPD—and that is a fairly sophisticated collaborative effort between a savvy owner, a savvy contractor, and a savvy architect| engineer team who all have common goals and where they are willing to share in the benefits of turning over a project,” Koonce explains. “Let’s say we did a project together and we saved $100 thousand on it. Well those benefits and those savings would be shared through predetermined mathematical formula.”
“I think that’s the only part of the integrated delivery method that we don’t do—it’s the sharing of the finances,” Prozeralik says. “We put in our fees, contractor puts in his costs, you know, the savings and whatever profits that we make are pretty much ours. We hit a lot of those cylinders, but we don’t hit all of them—but I don’t necessarily think that’s a good or bad thing. I think the way that we deliver projects with design assist or design build are very beneficial.”
Despite its benefits and growing popularity in the industry, many architects will not touch IPD with a ten-foot pole. After all, two’s company, and anyone who has ever tried to divide an estate between three beneficiaries knows that three’s a crowd.
However, Jolley looks forward to getting his feet wet in the IPD method.
“While we have not yet seen an IPD in Alaska, we are looking forward to working on one with the right client. The nature of this type of project delivery is complementary to our company’s culture,” Jolley says.
Mari Gallion is Associate Editor at Alaska Business Monthly.
Posted: March 1, 2013