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G individual subcontractors design build

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Unformatted text preview: iduciary with owner Fiduciary DB Selection Considerations DB Timing tension for when to recruit DB firm Timing Earlier recruitment: Earlier Hard to judge – like beauty contest Hard judge Later recruit: Less benefit from DB Later E.g. Lower ability to fast-track E.g. Limit creativity (closer to GC) Limit Often have segmented pricing (cost-plus design, fixed Often plus price or GMP construction) price More comprehensive selection process typical More Design/Price/Schedule/Team Design/Price/Schedule/Team Design competitions undertaken Design Example Design-Build: I15 Example Originally slated as DBB, but made DB to fast-track Originally Hard deadline due to 2002 SLC Olympic Games Hard $1.3B joint venture (Kiewit lead company) $1.3B US DOT as owner agency US Bidded project (with rights to use unsuccessful) Bidded Unsuccessful bidders became subcontractors Unsuccessful Reputation foremost Reputation 200 Subcontractors 200 Few reviews Few Finished 5 months ahead of schedule Finished Modified CM Design/Build: Modified Design Subcontracted (CM Serves as Design/Builder and Subcontractors Design) Owner CM Design/Builder Sub-Contractor Sub-Contractor Sub-Contractor Architect/Engineer Sub-Contractor [Howell et al., 1998] CM Oversight Design/Build CM (CM Provides Agency Oversight on Owner’s Behalf) Owner CM Design/Build Contractor Sub-Contractor Sub-Contractor Sub-Contractor Sub-Contractor [Howell et al., 1998] Other Delivery Methods Other Turnkey (Like DB but Contractor Financed) Turnkey Very common in residential housing Very Gives owner time to raise money during construct. Gives Design-Build-Operate-Transfer (BOT) Design Long-term financing (vs. DBO) Long Can compete on size, transfer time, etc. Can Have different guarantees needed to entice Have Multiple Primes Multiple Phase construct.,hand-pick team,sophisticated owner Phase pick team,sophisticated Owner/Agent (owner does part of design) Owner/Agent Type of Relationships Among Participants Participants OwnerA/E OwnerContr. A/EContr. DBB K K PCM K CMR K K _ C _ D/B K* OwnerCM _ CMA/E _ CMContr. _ K C C K _ C _ K _ _ I K: Contractual Relationship C: Communication Relationship I: Internal Relationship *: Contractual Relationship between the Owner and the D/B Team Image by MIT OpenCourseWare. Management Construction Design Build Approach Type of contracts Traditional Advantages of the 3 Most Common Delivery Methods Common Advantages Legal and contractual precedent X Cost determined before contract commitment X Fast-tracked construction allowed X Minimum owner involvement X Cost benefit from competition X X X X Negotiation with quality contractor for unique expertise X X Allow adjustment to new conditions without changing agreement X X Single firm control of design/construct process X Adapted from Gould and Joyce, 2002 Management Construction Design Build Type of contracts Approach Traditional Disadvantages of the 3 Most Common Delivery Methods Common Disadvantages Design does not benefit from construction expertise X Design construction time is the longest X Adversarial relationship owner/designer vs contractor X Contract agreement affected by changes X ~x ~x Few checks and balances X Cost control occurs late in project X Contract amount may be complicated by continual contractor negotiations X Contract agreement affected by unforeseen conditions X ~x ~x Modified from Gould and Joyce, 2002 Issues with Bids Issues Low bidders can be unreliable Low Prequalify aggressively! Prequalify To allow for fast-tracking may bid early (30%) To Don’t try to force delivery from low bid Don Growing Frequency: innovative bidding method Growing Pressure for lowest bid can create Pressure Cutting corners Cutting Low-quality personnel Low Bad feelings Bad Part II Part Payment Schedule Payment Payment Schemes Payment Extremes Extremes Payment method: Product Type: Award method Reimbursable Service Solicit based on Reputation and agree via Negotiation Fixed Price Commodity Bidding Key Idea Here: Risk Sharing Key Different parties have ability to manage or Different tolerate different types of risk Owner (or big contractor) often better: Geotechnical Owner risk, weather risk Contractor better: Risk of slow teams, equipment Contractor quality, procurement, quality of supervision Divide risks within an agreement to Divide Save money on contract price Save Provide incentive to contractors to finish early, in Provide budget, good quality Fundamental Ideas Fundamental Contractors are often highly risk averse Contractors Recall risk premiums: Contractor willing to “pay” owner Recall (charge less for contract) if owner takes on risk – if have to For risks that contractor can’t control, may be willing to For can control, pay a risk premium to owner to take over Contractor here will lower costs if owner assumes certain risk Contractor (essentially, paying the owner a risk premium) For risks that contractors can control, cheaper for a For can contractor to manage risk than to pay a risk premium manage Fundamental Ideas II Fundamental Structure contract so that Structure Risks contractor can better handle are imposed on Risks contractor (i.e. contractor will lose $ if don’t control) To be competitive, will have to manage these To manage Risks owner can better handle are kept by owner Risks “’’Risk can be better handled by A vs. B” here “ means that the risk premium that would be charged by the A for taking on this risk is smaller than would be charged by...
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