Working with a design-build firm on new construction projects can be best for the bottom line.
By William Di Santo
Pent-up demand exists for new retail construction and recent data shows that the improving economy could trigger a wave of new development nationwide in the near future. Retail sales are starting to rebound at bullish pace as the Commerce Department reported an increase of 1.1% in March [2014] — the largest gain since September 2012. As consumers continue to gain more confidence and retailers see more profits, expansions and new ground-up development will pick up, keeping retail general contractors, architects, engineers and developers busy in the coming years.
When considering a new store or location in the future, rather than attempting to corral all of these real estate professionals for a single project, it may be easier and more cost-effective to go with a one-stop-shop design-build firm. These companies work directly with retailers and property owners from the very beginning of the process to develop the drawings, determine the project costs, hire the subcontractors and oversee the construction process. They typically have team members on staff who can provide architecture and engineering services, bringing all of the important aspects of a project under one roof. This saves the tenant or developer time and money by creating a single point of contact for each development.
The standard procedure for a new development has been to first work with an architect to develop drawings, and then competitively bid out those documents to general contractors and consulting firms based on the lowest price. While this method has worked for years, it’s not the most efficient way to approach a project.
It’s not really a secret, but architects, engineers and contractors don’t always see eye to eye. An architect may dream up an impressive project, but once a contractor takes a look at the drawings and the proposed site, a different reality may have to be addressed. Likewise, if a contractor gets behind on their construction schedule, the consulting firms might not be able to complete their work on time. In short, while these three entities have to work together, the coordination and camaraderie is often lacking and an adversarial relationship is often formed if the owner has bid out the work solely on price.
The problem in these scenarios is that the cost always affects the retailer or developer — not the service providers. If changes are made because of unrealistic decisions or firms have to book more hours because they are waiting for another service provider to finish their work, it usually hits the retailer’s pocket book. Shifting responsibility for a project to a single entity — in this case, a qualified design-build firm — eliminates this conflict.
A qualified design-build firm brings many benefits to a project, protecting tenants and developers from the risks and headaches that often come with the competitive bidding process. They can also rest easy knowing that any change orders that arise during construction or any extra work that takes place due to unforeseen circumstances are the responsibility of the design-build firm, not them. Fortunately, these situations rarely arise, as it is in the design-build firm’s best interest to complete their due diligence.
Another benefit is that the relationship between a design-build firm and a client is much more of a partnership than the traditional competitive bid process allows for. Rather than simply following plans and doing strictly what the documents require, a design-build firm will work with a client from the very beginning to determine the scope of the project. During the development process, the client and the design-build firm will work together to establish a realistic budget and list of wants and needs, and lock in prices on materials and labor for the project. They will also define the most important aspects of the project — for example, lighting or flooring — and determine what can be scaled back.
This process helps the design-build team decide how best to allocate the project’s finances, typically allowing the budget to focus on important items and locating the highest-value materials. By establishing a realistic budget with needs and wants, the retailer is not simply putting everything into the drawings and hoping for the best in the bidding and construction process. It will all be locked in for the duration of the project.
Armed with all of this information, the design-build firm then gets to play the role of the project manager, locating and coordinating the best subcontractors, establishing a schedule and overseeing the construction process. This works in the client’s favor because the design-build firm will likely work with a trusted set of subcontractors that will deliver a solid project in a timely fashion. Relationships on a project count. Time is money and if a project has a better chance of staying on schedule because of familiarity between the development team members, it may prove valuable to the end user.
Throughout the process, the design-build firm will also locate opportunities for the client to save money. A tenant or developer may be set on using certain materials, but perhaps there is a less expensive alternative that still delivers the same capabilities or appearance. These are the kind of things a good design-build firm will let a client know. Controlling costs is in the design-build firm’s best interest, as there is typically a profit share system worked out between the two parties, with the client receiving the lion’s share of savings.
Working with a design-build firm guarantees a much smoother development process, generating savings on materials and labor and delivering a quality product backed by experienced, proven subcontractors. Most importantly, the risk of a typical competitive bid project is eliminated as all decisions and agreements are owned by the design-build firm.
So for your next project, give the keys to a reputable design-build firm and reap the benefits.
— William Di Santo is president of Englewood Construction in Lemont, Illinois. With more than 30 years of experience in the construction and design industry, Di Santo is responsible for the day-to-day operations of the Chicago-area office, which concentrates on all aspects of commercial construction nationally. Email the author at [email protected].