Scope and Quality Equals Cost
All construction projects have a scope and quality level, and these two factors should produce a predictable cost, especially with competitive bidding: Scope times Quality equals Cost.
Why, then, do competitive bidding results sometimes appear all over the map?
Well, because that’s life. One contractor might be hungry, and bids low. Another might be busy, and bids high. Some contractors might get bids from subcontractors, while others self-perform.
Uncertainty in bidding causes a lot of stress for architects, including myself. Clients ask me for cost guidance all the time. I would like to tell them that 5,000 square feet of office space will cost $200 per square foot, so bids will come in at $1 Million. If the client can spend $1.2 Million, and needs the extra 1,000 square feet of space, I want to design that needed 6,000 square feet. If the client only has $800,000, then I want to produce a 4,000-square foot project.
However, no two projects are the same, and are therefore perfectly comparable. One project might be geographically further away from bidders. The project might bid in April instead of November. One project comes in at $175 per square foot, the other at $225 per square foot.
Thus, for architects, design-bid-build is an uncertain, stressful, and therefore relatively unattractive procurement method. Using an independent cost consultant is one way to relieve this stress; it’s someone else’s responsibility to predict where bids might land. Another way is to use an alternative project delivery method: design-build, construction manager, or integrated project delivery. All these methods likewise shift the cost prediction burden onto someone else’s shoulders, namely the contractor.
Design-build and construction manager (at risk) procurement reduces stress for the design team but potentially adds stress on the owner side. The owner, who would like to use market forces to control costs, may justifiably feel this tool has been taken away, or at least compromised. The fact that both contractors and designers like design-build and construction manager at risk procurement methods may in itself give reason for owners to be wary. If the other two parties like something, there is a good chance the owner is getting the short end of the stick.
Fairness and Risk
But which stick?
There is a compelling argument to be made that design-bid-build is ideally suited to give the owner the lowest bid price at bid time, at the risk of compromising quality, construction time and final project cost. First, competitive bids incentivize bidders to find and exploit ambiguities in the contract documents. Second, competitive bids incentivize contractors to seek the lowest quality level and responsive schedule acceptable to the owner and architect. Third, competitive bids are the most susceptible to change orders during construction. In choosing design-bid-build, owners may be prioritizing low first cost when they should be prioritizing quality and final project cost.
All parties to a construction project should be interested in good quality, at a fair price, delivered on time with few surprises. As with car buying, there are very few steals of a deal out there. Procurement methods like design-build and construction manager at risk do not overly burden owners with the risk of paying too much. They can provide fair and reasonable pricing assurance to the entire project team.